What Others Won't Tell You - It's Not Rocket Science
This Short Video Summarizes
Interest Rates Video.mp4
Anyone can tell you that there are many factors influencing interest rates overall. (The following excludes consideration of your individual circumstances; see “How Lenders Evaluate You”.)
The primary factor in all interest rates (home loans, credit cards, personal loans, auto loans, etc.) is the Federal Reserve Prime Rate. Set and changed periodically, according to their assessment of economic conditions, by the Federal Reserve Board, a government institution, this rate has been set at zero since the early pandemic, to help economic activity as much as possible. The “Fed” has, at this writing circa 1/1/22, announced 3 separate ¼ point increases for 2022.
They can, and do sometimes, change their mind or modify any plan. So, interest rates have now ticked up now already from an all-time 50-year low last year of about 2.67%* to about 6.0% (8/22) now, for a 30-year conventional mortgage. Due to other factors, it could go higher, or not. I expect rates to hit 7.25% within a year. The Fed might change their mind due to evolving economic conditions too, adding or deleting any planned rate increase.
Bottom line: For every $100,000 in mortgage debt, a 1/4 point change in interest rate is about $15/mo. So, for say, a $400,000 mortgage, that 1/4 point rate change causes a payment change of about $15 x 4 = $60 and then x 4 = $240/mo.
Other factors influencing interest rates include retail banking competition (in credit cards, mortgages, etc.), demand for loans, institutional banking activity and higher-level competition on those and other fronts, inflation and other measures of economic activity (influencing decision-making), and more that nobody can understand or predict. A PhD candidate in economics might do a dissertation on some facet of interest rates – it can be construed as that complicated.
*Any figures quoted are strictly anecdotal – that is, we relate experiences of our agents on actual deals. We aren't pre-occupied with national numbers since the only numbers that matter are for your area, in your price range, with your credit score, etc. We do not mean to imply any sort of "statistically significant" or widespread research, unless specifically noted.
*Important qualifications regarding all information on this site: All numbers represent the experience of our agents and may not accurately reflect national averages or others' numbers. All examples are anecdotal, and should not be regarded as relevant to your own circumstances. Our firm provides the information on this website for general guidance only, and does not constitute the provision of legal advice, tax advice, accounting services, investment advice, real estate advice, or professional consulting of any kind. The information provided herein should not be used as a substitute for consultation with professional tax, accounting, legal, finance, realtor estate r other competent advisers. Before making any decision or taking any action, you should consult a professional adviser who has been provided with all pertinent facts relevant to your particular situation. All information is provided "as is," with no assurance or guarantee of completeness, accuracy, or timeliness of the information, and without warranty of any kind, express or implied, including but not limited to warranties of performance, merchantability, and fitness for a particular purpose. To review your situation, reach us at 914-413-3689.