Mortgage rates aren’t just pulled out of thin air—they’re influenced by a mix of big-picture economics and personal borrower details. On a larger scale, the Federal Reserve plays a major role by adjusting the federal funds rate, which impacts how expensive it is for banks to borrow money. When the Fed raises rates, mortgage rates tend to follow. Other factors, like inflation, bond markets, and investor demand for mortgage-backed securities (MBS), also shape what lenders charge. If inflation is high or the economy is booming, rates tend to go up. If things slow down, rates may drop to encourage borrowing.
On an individual level, lenders decide your mortgage rate based on how risky they think you are as a borrower. Credit score, down payment, loan type, and debt-to-income ratio all play a role. The better your credit and the lower your debt, the more likely you are to get a lower rate. And don’t forget—shopping around can make a big difference! One lender might offer you a better deal than another, so comparing offers is key to getting the best rate possible.
