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Economists say loan rates are affected by a complicated combination of factors, but there are tactics consumers can use to land a lower rate.
U.S. average 30-year fixed-rate mortgage
Mortgage rates are running at a 22-year high, crimping a housing market already squeezed by high prices.
Home buyers face an average rate of 7.23 percent on a 30-year fixed-rate mortgage, the most popular home loan in the United States, Freddie Mac reported on Aug. 24. That was the highest rate since June 2001.
The rise in rates has cooled demand for homes, with sales of existing homes down sharply from last year. And sellers who locked in low rates during the pandemic are reluctant to put their homes on the market because they fear they will not be able to find a comparable rate when they become buyers.
Mortgage rates are influenced by a number of factors, most beyond our control. The biggest driver is the bond market, but there’s more to it than that, said Melissa Cohn, regional vice president at William Raveis Mortgage, a real estate lender.
“Most consumers look at the simple story, but there are other forces at work,” she said. “We have a much more complicated economy.”
What influences mortgage rates?
It starts with the bond market.
Mortgage rates, like many other long-term loans, tend to track the rate, or yield, on the 10-year Treasury bond, which is seen as the safest bet for lenders because it is backed by the U.S. government. For many types of loans, lenders effectively start with that rate, often referred to as the risk-free rate, and then increase it to reflect the greater risk of not being repaid by borrowers like home buyers.
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