The Highest Rates

The current mortgage rate and the nation’s economy are closely tied. At first thought, one may believe that the best time to buy a house and get a mortgage is when the economy is strong, but this is not quite true.

The most important factor is always your own personal economic situation, how secure you feel in your job, and whether you can afford the down payment, closing costs, and monthly payments.

That said, the amount of money you will be paying every month will depend on the current mortgage rate. If the current interest rate is high, your payments will be high. A high interest rate will have a tempering effect on how much house you can afford.

Naturally, if the interest rate is lower, you can buy a more expensive house than you could with a higher interest rate. As such, it’s a wise move to pay close attention to the economic conditions that may affect the way the interest rate moves.

The Federal Reserve Board influences whether the current mortgage rate will go up or down, by setting the inter-bank rate, on which the current mortgage rate is based. In this way, the Fed carefully controls the economy, preventing the extremes of another Great Depression or runaway inflation. When the Fed lowers the rate to try to stimulate a stagnating economy, you, the mortgage shopper, get the benefit in the form of a lower rate.

A super-heated, booming economy of the type we saw in the 1980s yields high interest rates, and during that decade we saw current mortgage rates in the double-digits, as high as 15 percent.

If you’re the CEO of a dot-com making a million dollars a year, maybe it wouldn’t make much difference to you, but for most people, a 15 percent mortgage is a pretty hard pill to swallow. The recession of the 1990s brought significantly lower interest rates, and the current economic stagnation and global pressures have caused those rates to stay low, at least for the time being.