Why do you think mortgage rates have risen recently?

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Mortgage rates, like almost everything else in business, are linked to the basic principles of supply and demand. So, at their core, most of the indicators for predicting the rise or fall of mortgage rates are really just more complex methods of trying to predict supply and demand.

In a more nuanced sense, there are a lot of different factors that can indicate whether mortgage rates are set to rise or fall (like job growth/decline, federal policy, inflation, and bond rates) but one of the biggest factors is the state of the economy in general (Lewis, 2019).

When the general economy is looking good—in other words, it’s growing quickly, there’s higher inflation and low unemployment numbers—mortgage rates tend to rise. When economic growth is slowing, however, and job rates are low with high unemployment, mortgage rates tend to drop, too (Lewis, 2019).

The tricky thing is, the overall state of the economy is influenced by a lot of different forces: financial, of course, but also social.

To look at why rates might be rising, it’s important to take a holistic look at what’s been going on globally recently. The government released a jobs report that indicates an overall increase in jobs. The Federal Reserve lowered interest rates in October but hasn't made significant changes since then (Amadeo, 2020).

Perhaps most importantly, there has also been a global novel coronavirus scare originating in China that’s been gripping headlines—but the fear is fading here in the U.S. as we realize it’s not as deadly as we suspected.

In short, it seems like the economy is looking good, and nationwide fear of a pandemic has been assuaged—which means a rise in confidence and thus, a rise in mortgage rates.

Last Updated by eNotes Editorial on

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