What Factors Affect a Mortgage Rate? LUSO Federal Credit Union 2017-05-10 10:41:29 Important Information
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Several factors influence the health of the economy, such as unemployment, inflation, consumer confidence, and the housing market. If you are looking for mortgage rates in Ludlow or the surrounding area, these factors should be considered before you make any commitments or seek out a loan. It is important to understand what affects interest rates and why they change. Interest rates tend to reflect the demand from borrowers and the supply of funds available from lenders and providers. Here are some factors that affect rates for mortgage in Ludlow and the rest of Hampden County.


An important factor for mortgage lenders is the gradual upward movement of prices due to inflation. Inflation wears down the purchasing power of dollars over time, and lenders typically have to maintain interest rates high enough to overcome the erosion of buying power to ensure their returns represent a reasonable net profit. Lenders monitor the rate of inflation carefully and make adjustments to rates accordingly.

Economic Growth

Economic growth indicators such as gross domestic product (GDP) and employment rate also influence lenders. Higher levels of economic growth tend to result in higher incomes, increased levels of consumer spending, and more people seeking to obtain mortgage loans for home purchases. The spike in demand for mortgages usually propels mortgage rates higher because there is a limited supply of money lenders are able to provide. The opposite effect results from an economy that is weakening.

Monetary Policy

One of the most important factors that influence the general economy and interest rates is the monetary policy. The Federal Reserve Bank does not have set interest rates in the mortgage market, but its actions to establish the Fed Funds rate and adjust the money supply have a big impact on the interest rates available. Increases in the money supply generally put downward pressure on rates while shortening the money supply pushes rates upward.

Demand for Loan

Since the economic recession, fewer Americans have been financially able or willing to take on large amounts of debt, such as a mortgage loan. A higher supply of mortgage loans, for example, results in reduced loan rates because of the decreased demand. As the demand for funds increases, interest rates rise and act as a ration for available funds.

Why Choose LUSO Federal Credit Union?

There are many places to go if you are looking for a mortgage loan, but it’s a good idea to go with a company that is aware of the changes in the market and who can get you the best possible rates. If you are looking for a trustworthy mortgage lender in Ludlow and the surrounding area, LUSO Federal Credit Union can help you. Our professionals can help you manage your finances, get out of credit card debt, start saving for future goals, and set you up with a reverse mortgage loan. Our services and rates are available in Wilbraham and Ludlow, Massachusetts. Contact us at our Ludlow branch at 1(844) 587-6328 or our Wilbraham branch at 1-(800) 808-5876 to learn more.