Factors That Will Impact Your Mortgage Rate in 2024

Factors That Will Impact Your Mortgage Rate in 2024


There are a few really important numbers when it’s time to obtain a home loan: your credit score, the amount you want to borrow, and the interest rate. The news is full of talk about interest rates lately. Will they go up? Will they go down? Will they stay down?


It’s a losing battle to follow the news on mortgage interest rates on a daily basis if you’re hoping to lock in the best possible loan rate. However, you can certainly get a sense of key trends by keeping your eyes and ears open when it comes to the economy and the bigger picture of the housing market.

However, before you do that, you’ll want to make sure you understand what factors are at play that will be influencing mortgage rates in 2024.


Economic Health & Supply and Demand

The overall economy affects mortgage rates. When the gross domestic product (or GDP) and employment rise, it’s a sign of a growing economy, so there is a greater demand for goods and services, including real estate. A growing economy creates competition from those wishing to borrow money. This demand causes interest rates to rise.


The opposite is true in a slowing economy. When demand falls, interest rates tend to go down.


In terms of home loans, the “supply” is the money (or credit) available to lend. A high demand for mortgages means banks have less money to lend; therefore, the cost of a loan goes up via higher interest rates. 


This also means that when there is more money to lend, or an increase in the supply of credit, the cost of borrowing goes down in the form of reduced interest rates. 


Another factor is how other debts impact a bank’s ability to lend money. For example, a missed credit card payment or mortgage payment will reduce the amount of credit available in the market. When the credit supply tightens, that creates higher interest rates. 


Inflation

Everyone is affected by inflation. You, your mom, your dry cleaner, and even your bank. 


Inflation occurs when the money supply used to purchase products exceeds the products available for purchase. The bigger the gap, the higher the inflation. Put another way, a high rate of inflation means your dollar doesn’t go as far. You have to do more with less.


Higher inflation will typically cause Treasury yields and mortgage rates to rise as well. This occurs because investors demand higher rates as compensation for the decrease in the purchasing power of money they are paid over the course of the loan.


The Federal Reserve

When the Federal Reserve raises or lowers the federal funds rate, which is the rate lenders charge one another, it can create a ripple effect resulting in higher or lower mortgage rates. While the Fed Rate doesn’t have a direct impact on mortgage rates, it impacts several markets across the globe, and the effects are felt in the mortgage market.


The fed funds rate can be as low as zero, and it affects the bottom line of those offering credit. When the Fed is trying to control inflation, or cool the market, they start raising this rate in increments over time. When they’re trying to spur the economy, they start lowering the fed funds rate.



Recently inflation has started to cool, a signal that the rate increases over the past few years have worked and are bringing inflation back down. As a result, the Fed’s hikes have gotten smaller and less frequent. In fact, there haven’t been any increases since July.

Overcoming Housing Market Fears

By Luminate Marketing Team • 06 May, 2024
The recent headlines broadcasting mortgage rates surpassing the 7% mark have instilled a sense of apprehension among potential homebuyers. In a market perceived as increasingly unaffordable, it's easy to feel discouraged. However, with the right mortgage strategy, you can transform this challenging market into an opportunity.  Historical Perspective on Mortgage Rates While current rates hovering around 7% seem daunting, a historical review reveals a broader context. During the early 1980s, mortgage rates soared to 18% and even in more stable times, rates have frequently fluctuated above 10%. This historical perspective is vital because it demonstrates that while today’s rates are higher than in recent years, they remain within a historical long-term normal rate range.

Why Cash Buyers Dominate the 2024 Real Estate Market

By Luminate Marketing Team • 28 Apr, 2024
The 2024 real estate market is ROUGH. Losing to multiple offers, emotional frustration, and the stress from competing offers is discouraging to say the least. Notably 32% of home sales are being clinched by all-cash buyers, the strategic advantage of wielding cash has never been clearer. This resurgence in all-cash transactions underscores a market where immediacy and certainty reign supreme, especially as home prices continue their upward trajectory against a backdrop of scarce inventory. Within this context, it’s prudent to evaluate every option that can help you sell an existing home and get your offer accepted on a new home. Navigating the Alternatives iBuyers : These entities provide a quick, straightforward selling process for homeowners looking to bypass the traditional market. By making instant cash offers, iBuyers appeal to those seeking immediacy and convenience. However, this often comes at a cost, including service fees and potentially lower offer prices, as the iBuyer model is designed for speed over maximizing seller profits. Power Buyers : Power buyer programs cater to homeowners wishing to purchase their next home before selling their current one. They typically employ financial tools like bridge loans to facilitate this process, offering a solution to the timing mismatch between buying and selling. While this approach adds flexibility, it can also introduce complexity and additional costs into the transaction. But it's important to remember that not all of the innovative iBuyer and Power Buyer programs are the same. It's all about finding the right fit for your situation. Luminate's Unique Approach At Luminate Home Loans, we've carved out our own niche in the market. We offer a program that turns our clients into cash buyers. This isn't just a minor perk; it's a game-changer. Being a cash buyer makes your offer far more appealing to sellers, cutting through the delays that often come with loan approvals. Our approach is designed with you, the homeowner, in mind. We give you the immediate advantage of a cash offer, coupled with the flexibility to choose the best financing option for you down the line. It's about giving you control and confidence in your home-buying journey. If you're navigating the complexities of buying and selling homes, our program might just be the solution you've been searching for. We focus on ensuring our processes are straightforward, your personal information is secure, and the transition to your new home is as smooth as possible. With Luminate, you're not just moving houses. You're stepping into a well-thought-out system designed to get you into your dream home with ease and certainty. If this sounds like what you need, we're here to make it happen.

Understanding Economic Shifts: How Rising Fast Food Prices Intersect with the Housing Market

By Luminate Marketing Team • 21 Apr, 2024
Have you been noticing the prices of fast food and other products going up? Well, you're not alone. Across the country, families are feeling the financial pain of previously low-priced items suddenly costing double (or triple!) what they’re used to. For example, a lunch for two in California at a fast food chain can easily be $40 nowadays, which is a big jump for places that tout “cheap fast food.” But why exactly is this happening, and what does it have to do with you buying a home? Keep reading for more insights. Why Are Prices Going Up? Starting in April of 2024, the minimum wage for fast-food and healthcare facility employees in California was increased. As a result, their wages went from $16/hour to $20/hour in order to provide better wages and living conditions for these workers. This rise in minimum wage, while much needed for the economy, is happening all across the nation. And when businesses have to pay their employees more, they often raise their prices to cover the costs. Which, unfortunately, means the burger and fries you love might cost more now. What Does This Have to Do with Housing? In recent news, you may have heard of President Biden’s housing plan to help first-time homebuyers and to reduce housing costs. This plan would give money to first-time homebuyers and some families looking to sell their homes. But just like with the fast-food industry, the effects can vary. In some places like California, where not enough houses are available, making homes more affordable might not be enough. In other places, it might help a bit more. So, What's the Best Move for Homebuyers? If you're thinking about buying a home in the near future, it's good to know about these changes and plans. By staying informed and working with an expert lender, you can take advantage of any changes as soon as they happen. But even though extra money in the economy sounds great, it's important to look at the whole picture, like how many houses are available and how much they cost. If more homes become available and the costs of borrowing money for a home go down, this could be a better outcome for buyers vs money that is thrown into the economy. Conclusion Understanding these changes can help you make better, informed choices about your financial future. Whether you're saving up for a big purchase or just deciding where to grab lunch, let us help you save money where it counts! Reach out to us today so we can help you navigate your home-buying journey without having to skip out on the fries.
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