Rising and falling mortgage rates have a direct impact on the consumer home buying market.
Rising interest rates by the Fed impact consumer spending by encouraging saving. On the contrary, low interest rates encourage spending. Mortgage rates have a few more factors that impact rates. The general health of the economy a direct relationship with mortgage rates. When the economy is thriving with high wages and a steady job market, mortgage rates usually rise to sort of keep up. Rising mortgage rates in this instance serve a buffer to prevent the market from getting too hot. Rising mortgage rates in a growing economy maintains stability because it keeps consumers from borrowing too much.
Mortgage rates reached an all-time high in the early 80’s, peaking at around 18% for a 30-year fixed rate mortgage. Rates have been steadily falling since then. The average rate for 2018 was 4.54%, just a quarter of what rates once were in the early 80’s. With the exception of subtle rises, mortgage rates are expected to continue falling as we move into 2019. Check out this chart by macrotrends to see how mortgage rates have changed over the last 30+ years.
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