1. Federal Reserve monetary policy

Although the Federal Reserve cannot set specific interest rates, the Federal Funds Rate and adjusting the money supply upward or downward impacts interest rates available to borrowers.

2. Inflation

Mortgage lenders adjust interest rates to make up for diminished purchasing power when inflation rises quickly. Lenders still need to make a profit on the loans that they originate.

3. Economic conditions

The state of the economy influences mortgage pricing. During economic growth, consumers are willing to spend more and demand for mortgages causes rates to rise. In an economic decline with a decrease in demand for home loans, the opposite takes place.

4. Housing market conditions

When housing inventory is low, a decline in home buying leads to less demand for mortgages and therefore pushing rates down. When the market is hot and there’s an increase in demand, rates tend to rise.

5. The bond market

When the economic outlook is poor, investors will turn to bonds due to less potential risk. More funds being invested in bonds means less is going into other assets like mortgage-backed securities, causing interest rates to rise.

6. The borrower’s credit score and debt-to-income ratio

Lenders need to make sure you’re capable of paying back your mortgage. To assess your risk of default, mortgage lenders look at your debt-to-income (DTI) ratio and your credit score. A high DTI and a low credit score means lenders will offer you higher mortgage interest rates.

If personal loans or student loans are not an issue and you have little-to-no credit card debt, applying for a refinancing loan could be worth exploring. But if your credit score could use an improvement and you have a high loan balance, hitting the brakes on refinancing should be considered.


Refinancing can help pay off your mortgage more quickly and build the equity in your home. By saving on monthly payments, too, the burden of necessary but costly home improvements can be eased.

You can explore your mortgage refinance options in minutes by visiting Credible to compare rates and lenders and get prequalified today.