4 Major Factors Affecting Mortgage Rate Hikes

By Greg McCarthy

Greg McCarthy is a Broker and co-owner of The McCarthy Group at Keller Williams Realty Metropolitan in New Hampshire. Greg’s been a REALTOR in New Hampshire since 1999. He’s passionate about having helped over a thousand families with their home ownership needs throughout Southern New Hampshire.

Are you also wondering when mortgage rates will go down? Unfortunately, the mortgage rates have risen. There are several factors why: the economy, inflation, and your financial health. Whether it’s a buyer’s or seller’s market, your credit score, income, and down payment are also considered. But how exactly? Let’s break down how these factors impact mortgage rates.

1. Inflation and FED raise rates. Inflation makes everything expensive, meaning the value of your money decreases. Lenders raise their rates to keep up with the Feds or “the big boss of banks,” which tries to control inflation. If prices are rising fast, the Fed increases the interest rates banks charge each other. This leads to higher mortgage rates for us. It’s also about maintaining the value of money, however, it makes borrowing costly.

2. Economic boom and job growth. When people have more cash to spend and invest, they tend to borrow more. This higher demand for loans allows lenders to increase their rates. This is the same when many people have good jobs and steady incomes, they are more likely to buy homes, boosting mortgage demands and driving up rates.

3. Risk to lenders. If lenders think lending money is risky, they raise rates to protect themselves. High risk means higher interest rates. On the flip side, if banks are doing well, they offer lower rates to attract more borrowers. However, if they’re struggling, they’ll charge higher rates to cover costs and risks.

4. Market conditions and personal finances. In a seller’s market, rates tend to be higher and the opposite is true when we are in a buyer’s market, where rates could be lower. Your financial health also matters—high credit scores, steady income, and a big down payment can lower your rate than those with riskier financial situations.
Learn more about these factors to make smarter moves when buying or refinancing. If you need a referral, let us know. You can reach me by phone or you can email me at greg@themccarthygrp.com. We’ll ensure you get an expert to guide you through the process.