A mortgage loan is given by charging a rate of interest for the tenure of the loan. Interest rates are variable and keep changing, sometimes even sharply. A few factors that determine your mortgage loan interest rate are your financial and personal information as also fundamentals like economic and governmental conditions and policies.
So while looking for a home and doing any kind of home loan comparison,look for the availability of different and favourable rates. But always keep in mind that there are a number of factors that can cause fluctuations in them.
- Inflation Trends
Inflation and interest rates are positively correlated. Higher the inflation higher will be the interest rates and vice versa. The Consumer Price Index (CPI), is a reflector of the inflation rate. This monthly report displays changes in prices of goods and services included in the index. CPI is an average of changes in prices of goods and services. Inflation thus affects home loan rates too.
- Stock Market Movements
Stock markets are generally volatile. A drop in the stock market also results in a decline in the mortgage rate and vice versa. Stock market fluctuations are linked to expectations for economic growth based on the release of current data and various economic, monetary and fiscal policies. While stronger economic growth is favourable for stock prices to rise, it fuels inflation too. So it is unfavourable for mortgage interest rates. The opposite holds true as well.
- Your Credit Score
Your credit score is one of the key factors that affect the mortgage interest rate. It reflectsyour ability to pay back the loan which is an important consideration for the lender. If your credit score is high it improves your chances of getting a lower interest rate. A poor credit score means a poor credit history and will hike the interest rate you pay. If you improve your credit you can hope for a better rate.
What should be your strategy since the rates keep changing? If you can synchronize the lower rate and your readiness to purchase, you win the battle and lock the loan at a lower rate. When you lock a lower rate what you are essentially doing is protecting yourself from higher interest rates anytime later on during the period of the mortgage.
It is advisable to conduct detailed home loan comparison analysis and talk to a loan officer who tracks mortgage interest trends to know more about the interest rates.If you want to know more, don’t hesitate to contact us at Home Loan Comparison on 0419 856 669.