Why Do Mortgage Rates Fluctuate?

When you’re buying a home for sale in Lake City and you’re using a mortgage to get it, you’ll have to deal with interest rates – but for most people, they’re pretty mysterious.

Here’s what you need to know about why mortgage rates go up and down – and why it matters.

Your interest rate, which determines how much money you’ll pay a lender for letting you borrow money to buy a home, depends on the Federal Reserve and the U.S. economy.

For example, if you take out a $200,000 mortgage that lasts for 30 years, and your interest rate is 4 percent, you’ll pay the lender $143,739 in interest over that time.

The Federal Reserve provides more funding in the economy when economic activity is down, which can cause interest rates to go down. When economic activity is up, particularly when the Fed fears inflation, interest rates go up, too.

What’s a Rate Lock?

When you apply for a mortgage, your lender will most likely offer you a rate lock.

A rate lock is a lender’s commitment to let you borrow money at a certain interest rate as long as you close within a certain timeframe. For example, if your lender offers you a rate lock at 3.9 percent, regardless of what the market does (and whether interest rates go up), you can take advantage of it as long as you close in the lender’s timeframe. It’s kind-of like “if you buy now, you get this deal.”

In many cases, a rate lock costs you money. That’s why it’s important to not lock in a rate until you’re under contract on a home.

Are You Buying a Home for Sale in Lake City?

If you’re moving to Lake City, we can help you find the perfect place to live. Call us at 386-243-0124 to tell us what you want from your home and we will begin searching right away.

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