One of the most important deciding factors for home loans is mortgage interest rate. The reason is simple: it has a significant impact on the overall long-term cost of purchasing a home through financing. As a borrower, you would want to get the lowest possible rates available. But the fact remains that the best deal on mortgage rates are best offered to borrowers having the most solid finances and stellar credit histories.

Given the dynamics involved in mortgage interest rates, it makes sense to understand the important factors affecting mortgage interest rates drop, Orange County, CA. It helps home buyers better understand as to when is the best time to buy a home.

Here are two (2) most important factors that contribute to interest rates drop, Orange County, CA.

Inflation

Mortgage lenders keep an eye on the prevailing market trends, including inflation. They generally have to maintain interest rates at a level that is at least enough to hurdle the erosion of purchasing power through inflation to ensure a real net profit and keep their business afloat.

Supposing the mortgage rates are at 4% and the inflation rate is at 2%, the lender gets back 2%. When the inflation rate is bigger than 4%, expect higher mortgage rates as they move to keep their business afloat.

From a borrower’s perspective, one should keep an eye on lower inflation rates as it is highly likely you get the best deals on mortgage loans during this time.

Federal reserve monetary policy

The monetary policy is another important factor that influences interest rates, including mortgage rates. Though the Federal Reserve does not set the specific mortgage interest rates, its actions, particularly in establishing the Fed Funds rate and the money supply adjustment, have a crucial impact on the interest rates available to the borrowing public. The principle behind this money supply/demand dynamics is that when the supply of money increases, it pushes the rates downward. This is another item that borrowers should watch out for.

Have more questions about factors contributing to interest rates drop, Orange County, CA? Talk to an expert at HomePlus Mortgage today.

Call us today at 800-810-PLUS (7587).