If, like most Americans, you don’t have a family that can finance a house purchase for you, the chances are that you’re looking at getting a mortgage. This can appear an intimidating thing to do given the amount of money involved but the reality is that much of the economy is based on financial products of this kind. According to research from the Policy Advice website, $15.8tn is tied up in mortgages in the USA.
Policy Advice adds that the average mortgage stands at $282,660 with interest rates of either 3.94% (30 years) or 3.19% (15 years). This means that lenders can expect to make $5,535 on each mortgage. This doesn’t seem like an enormous profit until you consider how many of them there are out there. Around 6m homes are sold per year in the United States, with a good 5m of them involving existing houses.
Of course, regardless of how much you borrow, the lower the mortgage rate, the better. This has resulted in the comparison website taking the stage alongside providers as customers seek to lower their overall costs. This kind of company collects mortgage deals in one place, letting visitors browse by rate type, monthly payment, the annual percentage rate of charge, and several other fields.
The free tool Trussle claims that users can save money on their mortgage by applying online at a comparison site. It also provides safeguards to ensure that buyers are protected against losing their homes. Trussle collates the data of 12,000 deals from 90 lenders, something that can provide buyers with a window onto the entire mortgage market before they even begin the application process.
Getting a mortgage can still be an onerous task in the United States, as mortgage rates are up 37% since 2020. What exactly has caused this increase though? Supply and demand is the key factor in every industry serving the public (and, in fact, there are currently more buyers than houses in both the US and the UK) but mortgage rates are sensitive to several other forces too.
Financial information site Investopedia outlines five things that can change interest rates. These are inflation, economic growth rate, government policy, the bond market, and the current state of the housing market. Expand this a little, and it’s possible to fold grander concepts like the gross domestic product, unemployment, and wages into the mix. Put another way, mortgage rates are influenced by one (giant thing) – the US economy.
Let’s go into a little more detail, though. Inflation means that money isn’t as valuable as it once was, while slow economic growth can lower consumer spending and the need for both mortgages and home construction, sinking multiple sectors at once. Similarly, if the government isn’t putting money into the system, markets tend to stagnate. As mentioned, a lack of physical houses is a problem for buyers and lenders but so is a growth in the number of renters out there.
Overall, mortgage rates can serve as a microcosm of wider economic strength. If things are bad, rates go up, but boom times can produce better conditions for consumers.