Mortgage Rates Plunge: Top Factors

Mortgage Rates Plunge

A low mortgage interest rate is always a good signal for homeowners. And why not? After all, a low-interest rate reduces overall monthly costs for homeowners. But did you ever wonder why mortgage rates plunge in the first place?

Hear us out to learn what causes the rates to work in your favor.

Economic Growth

This couldn’t get truer. Poor economic growth translates to high unemployment, ultimately reducing the demand for homes and mortgages. As a result, mortgage rates plunge and make a loan more attractive for enthusiastic home-seekers.

Federal Reserve

FEDs are the powerhouse behind the fluctuations of mortgage rates. By shifting the money supply, FEDs can affect the interest rates. For example, during COVID, FEDs kept the rates near zero to facilitate economic growth.

The FEDs raised the money supply to execute this decision, which ultimately led to the mortgage rates plunge. 

The Bonds Market

Mortgage-backed securities (MBS) are loan products for investors. Since MBS are risky, they need to have a higher rate, and they move in line with the benchmark rate of a 10-year treasury bond.

Hence, if the rate of a 10-year bond reduces, a reciprocal change is observed in the mortgage rate.

Housing Market Conditions

The rates for mortgages depend largely upon the customer’s sentiments regarding the housing market. If there are fewer buyers and homes, there would be low demand for mortgages. As a result, mortgage rates plunge due to lower demand.

Similarly, several homeowners rent out properties and live as tenants, causing a decline in mortgage demand.


Here is another macro factor causing mortgage rates plunge. Quick rise inflation erodes the purchasing value of money; hence, lenders usually raise the interest rate to cover their losses. Let’s take an example of a $200,000 mortgage.

Suppose the inflation is 2%, the lender will probably charge an interest rate higher than 2% to protect their money.

Is the Interest Rate the Same for Second Homes?

If you buy a second home, the mortgage interest rate are usually higher since the default risk is higher. However, second homes can also include investment properties, generating rental income. For such properties, the rate is higher than what you get on a primary residence.

What are the benefits of mortgages?

There are several prominent advantages of mortgages. Firstly, it goes without saying that a mortgage saves you from incurring a heavy lump sum payment for purchasing a home. Secondly, you can get tax deductibles on mortgage interest payments.

Mortgage tips

If you are wondering about how to get a mortgage loan and where to start, here are some mortgage tips you should know:

  • Improve your credit score
  • Know the difference between second homes vs. investment properties. Shop for multiple quotes and compare to find the suitable deal
  • Get your documents, pay stubs, ID cards, and verification letters ready

Take Advantage of Mortgage Rates Plunge!

All macro factors can contribute to the mortgage rates plunge from economic growth to inflation. But guess what? You can take advantage of the low rate and get a cost-effective mortgage loan. So, what are you waiting for?

Get quotes from top lenders at RateChecker Today!

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