Why do Mortgage Interest Rates Change so Often?

Mortgage interest rates can change daily, and even multiple times per day. Do you ever wonder why this is the case? Maybe you wonder how you should know when to lock a rate?

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Keep reading to learn about changing interest rates and how they may affect you.


The economy plays a large role in interest rates at any given time. When the economy is doing well, interest rates often go up. If the economy is good, people are borrowing and spending money. Lenders aren’t hurting for borrowers, and interest rates can remain higher as long as people keep borrowing.

If the economy is hurting, though, interest rates tend to fall. If there’s little spending and/or borrowing, interest rates come down to make it more affordable for potential borrowers. It’s the hope that the lower interest rates will not only help people borrow money, but will help the economy recover too.


The Federal Reserve doesn’t directly impact interest rates, unless they need to. If the flow of money in the economy is too high, causing inflation, the Fed may increase interest rates. If there is a less than desired amount of money flowing around the economy, the Fed may lower interest rates to get more people to borrow. The Fed does this by buying Treasury Bonds, which puts money into the economy, bringing interest rates back down.


Sometimes even world events can cause interest rates to rise or fall. If there’s something negative going on in the world and consumers are nervous, interest rates might fall due to lack of activity in the housing industry. If, on the other hand, something good happens and consumer confidence is up, interest rates may increase to slow down the flow of cash in the economy.

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If you have a specific interest rate that you want, it’s important to lock it in as soon as it’s available. Don’t wait, thinking that rates might fall again, because you never know. In fact, that interest rate that you wanted might not even be available for long. It depends on the reason that rates fell at that time. Was it a fluke thing, such as a reaction to some random news bulleting? If so, rates might go right back up to where they started once the news spreads and things calm down.

Your rate is never secure until you lock it. If you hesitate, thinking that rates might fall the next day or next week, you could be in for an unpleasant surprise. The best way to hedge against this risk is to lock your rate with a lender that offers a float down. This stipulation allows you to take a lower interest rate even after you have locked in your interest rate. It’s like getting the best of both worlds.

Because interest rates are affected by the economy and what’s going on in the world, it’s important to continually ask your loan officer about interest rates on a daily basis. Don’t assume that once you hear a rate one day that it will still be there a few weeks down the road when you are ready to lock it. Staying cognizant of the current rates will help you make the right choice for your situation.


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