Top 6 Reasons Behind Mortgage Rates Fluctuations

Do you know what mortgage rates are and how do they change? Before you start looking for a house, you need first learn the fundamentals of mortgages. The mortgage rate you lock in will affect a variety of factors, including your purchasing power and the amount of money you have left over each month for basic living expenditures. Mortgage rates fluctuate on a daily basis; understanding why this happens will help you take advantage of a lower rate before it rises. You can even try the CMHC down payment calculator to find out your mortgage payment and interest rate.

• Changes in Economic Growth

Lenders change mortgage rates to maximize profits. So, while the economy is booming and doing well, interest rates will rise to counteract the impact of inflation. When economic growth slows, mortgage rates typically rise, and vice versa.

• Government Policy

By modifying the amount of money in the economy, our government also regulates interest rates. To avoid a decline in the purchasing power of money due to excessively high inflation rates, they achieve this by acquiring Treasury bonds. The government essentially adds more money to the economy and lowers interest rates by purchasing Treasury bonds, which helps the economy grow.

• Bond Payouts/ Yields

Fixed rate mortgages are intimately correlated with bond yields issued by the Government of Canada. Because of this relationship, when bond yields rise due to a decline in bond prices, fixed mortgage rates also climb.

• Overnight Rate

The prime lending rate for mortgages and other interest rates, as well as the exchange rate for the Canadian dollar, are all influenced by the overnight rate that the Bank of Canada sets. Every year, the bank announces whether or not to alter the overnight rate across eight predetermined fixed dates.

• Stock Market

Bond interest typically declines during a stock market boom because investors think they will profit more from stocks. Mortgage rates fall or rise as a result of stock market fluctuations.

• International Events

Even changes in interest rates can be brought about by global events. Interest rates can decrease when there is a lack of spending activity and low consumer confidence, particularly in the housing and mortgage sector.

Lenders monitor all of these economic variables and modify mortgage rates as necessary. It's crucial to lock in an interest rate as soon as you discover one that is favorable. Speak with a mortgage advisor, who is an industry specialist, to find out if you're receiving a good rate. 

Satbir Bhullar is your trusted mortgage broker in Abbotsford, specializing in providing one of the best mortgage guidance and approval services. No matter, which mortgage you are planning to apply or what your credit score is, I am here to get you approved at any cost.