QNB Trust Blog

How does today's economic landscape impact mortgage rates?

Published on June 11, 2024

How does today's economic landscape impact mortgage rates?

The mortgage market is intricately tied to various economic factors that influence borrowing costs, interest rates, and overall affordability for homebuyers. Understanding the dynamics of these economic factors is essential for anyone considering purchasing a home or refinancing their mortgage. We will delve into the impact of key economic factors such as inflation, interest rates, and housing market trends on the mortgage market and borrowers' financial decisions.



Inflation refers to the gradual increase in the prices of goods and services over time, resulting in a decrease in the purchasing power of money.  It erodes the value of future cash flows, including mortgage payments. To compensate for the effects of inflation, lenders typically increase mortgage rates, leading to higher borrowing costs for homebuyers. The Federal Reserve closely monitors inflation trends and may adjust monetary policy, such as raising interest rates, to curb inflationary pressures. These policy decisions often directly & indirectly influence mortgage rates and borrowing costs in the mortgage market.


Interest Rates

The Federal Reserve plays a central role in setting short-term interest rates through its monetary policy decisions, particularly the federal funds rate.  Changes in short-term interest rates can indirectly affect long-term mortgage rates. When the Federal Reserve raises or lowers interest rates, mortgage rates often follow suit, albeit with some lag time.  Mortgage rates are also influenced by market forces such as investor demand for mortgage-backed securities (MBS), economic indicators, and global economic conditions.


Housing Market Trends

The balance between housing supply and demand in the real estate market can impact home prices, affordability, and mortgage activity. A strong demand for housing and limited inventory can drive up home prices, potentially leading to higher mortgage rates as lenders adjust to mitigate risk. Key economic indicators such as home sales, housing starts, and home price indices provide insights into the health of the housing market and can influence mortgage rates and borrowing costs.



Economic factors play a significant role in shaping the mortgage market and impacting borrowing costs for homebuyers. From inflation and interest rates to housing market trends, various economic indicators and policy decisions influence mortgage rates and affordability. As prospective homebuyers or homeowners considering refinancing, it's essential to stay informed about these economic factors and their potential implications for mortgage rates and borrowing costs. By understanding the interplay between economic trends and the mortgage market, borrowers can make informed decisions and navigate the home financing process more effectively.


For more information reach out to any of our expert mortgage loan officers by calling 706-869-6975 or on the web at



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