Mortgage Rates Rise With Good Economic News

The Reasons Why Mortgage Rates Rise When News About The Economy Is Positive

Updated: March 19, 2025

In an unusual trend, mortgage rates seem to surge during times of good economic news. This continues to affect homebuyers and refinancers in today’s fast-paced housing market. Knowing the intricate connections between economic indicators and mortgage rates helps one strategize better about home financing options.

What is The State of Mortgage Rate Economics

Over the years, mortgage rates have seen kaleidoscopic changes. Although there have been some historically low periods, rates have demonstrated an upward movement every time economic indicators get stronger. This reflects the complex interplay between the wider economy and the mortgage market.

Factors for Mortgage Rates Rise Around the World

• Monetary policymaking of the US Federal Reserve
• Indicators of Inflation
• Growth of Employment Opportunities
• Confidence Consumer Indices
• Geopolitical and Economic conditions

Mortgage Rates Rise Comes With Positive News in the Economy

Improved economic performance is often associated with increased spending from businesses, and, for a myriad of other reasons, leads to a spike in mortgage rates.

Change of Heart from Economists

During healthy economic conditions, other parts of the economy, such as the stock market, improve, which makes economists shift from buying bonds to selling them. This results in less funds available for mortgage-backed securities, which eventually shoots up the interest on mortgages.

Mortgage Rates Rise Expectations

Good growth can also lead to slower value increases in several goods and services. Expenses necessary to maintain proper income value for positions within a company lead to lower investment returns for bonds, which means lenders would have to sell more valuable products, causing higher interest when selling mortgages.

Policies From The Federal Reserve

The US needs to be under control and proactive short-term funding.

The Housing Market Remains Resilient Despite Rate Fluctuations  

It’s notable how exceptionally strong the demand for housing continues to be, even with the occasional monthly mortgage rate rise. The following reasons underpin this sustained strength in performance:  

Limited Housing Inventory

The constrained supply continues driving competition in many markets.  

Demographic Shifts

Millennials sequencing up to the mid-age factors signal young adult home buyers shifting toward peak purchasing years.  

Remote Work Flexibility

The geographic flexibility frees remote workers, allowing buyers to broaden their search perimeter.  

Housing as an Investment

The continual perception of real estate as a reliable defense against inflation maintains the attributes of investment in housing.  

What This Means for Homebuyers and Refinancers  

These trends pose unique opportunities and challenges for homebuyers and those considering refinancing their existing loans. Managing expectations with price and interest rate forecasts maximizes one’s chances.  

Don’t Try to Time the Market Perfectly

Waiting for ‘perfect’ rates has proven to be the most ineffective strategy to date, and historical data demonstrates that time and time again:  

Refinance Only When There is a Sufficient Price Difference

A sufficient gap is defined when the price difference between the old and new rates is dramatic enough to justify the switch.

Consider Your Long-Term Goals

Affordability, as well as your particular financial circumstances

Explore All Available Programs

A mortgage specialist should be able to define all the appropriate scope of options.

Make Moves When Rates Are In Your Target Range

You need to actively participate when rates are advantageous to your economic pursuits.

The Outlook for Mortgage Rates

There is no way to be certain about future mortgage rates. The fundamentals suggest there will still be volatility, increasing the economy’s performance. Any indication of weakness in the economy would likely lead to lower rates.  

Experts recommend not trying to track markets. Instead, focus on your mortgage needs and budget. The most affordable mortgage is one that’s pocket-friendly while still allowing the achievement of set goals and onward projection.  

*Got any queries concerning the effect of current mortgage rates on your refinancing or home buying? Please speak to our mortgage specialists as they mold strategies to unique individual needs.*  

This article is purely informational and should not be regarded as expert advice. As such, a qualified mortgage representative should validate before any steps concerning home financing are undertaken.

The article below is an older article about mortgage rates rise from August 5th, 2018 republished for archieves:

This news article is about mortgage rates increasing with good economic news. Mortgage rates have been steadily declining since the start of 2019. We have mortgage rates that hit a three-year low. However, mortgage rates have been creeping up over the past few weeks.

When the Federal Reserve Board announced a 25 basis point rate cut, mortgage rates went up instead of down.

Since the last interest rate cut by the Fed, mortgage rates are increasing. Good economic news means higher mortgage rates. This article will cover why mortgage rates are increasing with good news. You may be referring to a situation with a historically high demand for housing despite certain challenges or factors that might typically deter such demand. Several factors could contribute to this phenomenon:

Housing Demand Strong Despite Mortgage Rates Rise

 If there’s a significant increase in population, particularly in specific regions or cities, the demand for housing may rise. This can be driven by job opportunities, economic growth, or other favorable conditions. Historically low mortgage interest rates can make housing more affordable for potential buyers. When interest rates are low, it becomes more attractive for individuals to invest in real estate, leading to increased demand.

Mortgage Rates Rise with Limited Housing Supply 

Even with high demand, if the housing supply is limited, it can drive up prices and create a competitive market. This scarcity can be due to zoning restrictions, slow construction, or geographical constraints.   In some cases, despite economic challenges in other sectors, the real estate market might remain stable or even thrive. People may still prioritize homeownership, considering it a long-term investment and a hedge against economic uncertainties.

Mortgage Rates Rise with Remote Work Trends

The rise of remote work may influence housing demand in different ways. Some individuals may seek homes in suburban or rural areas, leading to increased demand in those regions. Government policies and incentives, such as tax breaks for homeownership, can stimulate demand for housing.

Cultural or societal preferences for homeownership, a desire for more space, or a preference for specific housing types (e.g., single-family homes) can contribute to sustained demand.

It’s essential to note that housing markets can be complex, and multiple factors can interact to influence demand. Economic conditions, interest rates, and local market dynamics all play roles in shaping the real estate landscape. If there’s a specific context or location you’re interested in, it could provide more insight into the reasons behind the high demand for housing despite historic highs.

Mortgage Rates Rise During Hot Housing Market

Low rates are great news for homeowners refinancing and homebuyers buying new homes. The housing market is hot. Homes are appreciated nationwide. Some areas are seeing double-digit annual appreciation.

Many homeowners and buyers sitting on the sidelines are now thinking twice about refinancing or buying a home.

Experts predict that rates will not stay low forever. The demand for housing remains strong. Rates depend on the economy and the Fed’s actions in the coming weeks and months. Mortgage borrowers should not panic. Rates go up and down. Rates are dependent on the bond market.

Reasons Why Mortgage Rates Rise

With multiple good news stories back-to-back, mortgage rates rise. The Federal Reserve Board cut rates and is expected to lower interest rates even further. The stock markets are at an all-time high with no signs of correction. Unemployment numbers have been at a 50-year low. Inflation is almost nonexistent. Manufacturing numbers are setting historical records. Minority unemployment numbers are at historic lows. President Trump seemed to have reached the tariff fiasco with China and other world leaders.

Mortgage Rates Rise During Hot Housing Market

Home values are increasing nationwide, except for high-taxed states. HUD, the parent of FHA, has increased FHA loan limits for the past three years due to rising home prices. 2025 FHA Loan Limit is capped at $524,225. The Federal Housing Finance Agency has followed HUD’s lead and increased conventional loan limits for the past three years. 2025 Conforming Loan Limits is now capped at $806,500. There is no sign of a market correction in the near future. Our economy has thrived for the last 11 years with no signs of a recession.

Subprime and Alternative Financing Is Back

The housing market is a strong indicator of what the economy is doing. Launching non-QM and bank statement loans for self-employed borrowers has intensified the strong housing market. Other alternative mortgage programs, such as asset depletion, fix and flip loans, and alternative financing loan programs, added fuel to the fire of the housing market. More people are investing in real estate since the 2008 Great Recession and Housing Collapse. Many lenders have eased mortgage guidelines on government and conventional loans. Borrowers who do not qualify for government or conventional loans can now have alternative mortgage programs at competitive rates.

FAQ’s When Mortgage Rates Rise

Common Inquiries About When Mortgage Rates Rise

Q: What causes the increase in mortgage loan interest rates?

Answer:

• Mortgage rates usually increase due to greater economic growth, rising inflation expectations, changes in Federal Reserve policy, increasing Treasury yields, and lower demand for mortgage-backed securities.
• There is often a shift in the economy where investors shift their money into stocks, reducing the bond market and thus increasing the interest rates on mortgage-backed securities.

Q: What is the impact of increasing mortgage rates on the affordability of homes?

Answer

• Buyers face greater cost burdens as rates increase because payments rise for the same loan amount.
• For instance, a $300,000 mortgage loan requiring a 3% payment ranges at approximately $1,265, while at four percent, it is around $1,432.
• This decreases overall purchasing ability, forcing buyers to consider cheaper homes or make larger initial payments.

Q: Can I hold off on purchasing a home until rates drop to buy a home?

Answer

• Rate timing for mortgages is a very challenging task.
• Purchases may rise, increasing the cost of homes, making them less affordable, making it even more difficult.
• These decisions concerning housing should largely center around your unique circumstances, personal needs, financial situation, and long-term plans rather than changes in rates in the short term.
• If the rates fall drastically, keep in mind that refinancing is always an option.

Inquiries for Individuals Looking to Purchase Homes

Q: What steps should I follow to earn my best mortgage with increased market rates?

Answer

• To be in a position to receive the best available rates, consider doing the following actions:
• Increase your credit rating (make sure it is above 740).
• Put more money aside for a down payment (more than 20%).
• Lower your debt-to-income ratio (under 36%).
• Think of buying points to lower your rate.
• Shop around several lenders to compare their offers.
• If you plan to own the home in the short term, consider other loan types, such as adjustable-rate mortgages.

Q: Should I fix my mortgage rate?

Answer

• Usually, it is best to lock the loan rate as soon as possible to mitigate the impact of increasing rates.
• Generally, loan locks are issued for 30-60 days, enabling you to ride out increases in interest rates over that period.
• Some lenders offer “Float down” provisions to allow you to take advantage of decreased interest rates during the lock period(sometimes for a fee).

Q: What’s the difference in my pre-approval amount if the rates increase in mortgage interest?

Answer

• Rule of thumb – every 0.5% rise in interest rates reduces your purchasing power by 5%.
• For instance, if you were pre-approved for a $400,000 loan at 3.5%, it would drop to $380,000 with a rate increase of 4% while maintaining the same monthly payment.

Questions from Homeowners

Q: What should I think about when refinancing during a rate increase?

Answer

Consider refinancing when:

• Your current rate is above market.
• You are still in the period of an ARM loan, and you want to lock into a fixed-rate loan before rates increase.
• You need to get rid of your mortgage insurance (MI).
• Your situation requires that you cash out some of your equity.
• You are trying to reduce your loan term (e.g., 30 to 15 years).

Q: What happens to my adjustable-rate mortgage (ARM) in a rising rate environment?

Answer

• If you possess an ARM, your interest rate and monthly payment will increase after the fixed-rate term.
• Check the associated documentation for the loan to gauge your rate adjustment caps and maximum rate.
• If you intend to stay long, evaluating refinance options before adjustment periods into a fixed mortgage might make sense.

Q: Is paying points on my mortgage worth it?

Answer

• Below are a couple of scenarios when paying points to a lower rate (each point equals 1% of your loan amount) is beneficial:
• You intend to keep the mortgage for more than a few years.
• You can pay the upfront cost.
• The time to recuperate your monthly savings aligns with your set time frame of homeownership, also known as the break-even point.

Investment and the Market

Q: How does the recent increase in mortgage rates affect the housing market?

Answer

• Values of homes tend to:
• Slow down the rate at which they increase in value.
• Fall drastically as more people quit buying homes due to the increased mortgage costs.
• Please stay on the market longer as there are fewer sellers, or they might sell less.
• Increase rental supply.

Q: Do rising mortgage rates mean a bubble in the housing market?

Answer

• Not directly.
• Sudden changes in rates are not an indicator of a bubble.
• What indicates a bubble is the overall economic growth the demand for houses brings.
• However, if the rate sees an upward spike, one can say there is an overheated market.
• The primary things to watch are the housing supply, growth in jobs and wages, and the pace at which prices rise relative to income.

Q: In what ways do increasing rates impact real estate investments?  

Answer

• With increasing rates, an investor may experience the following impacts:
• Increased costs associated with borrowing lead to diminished cash flow on new purchases.
• Values of properties may decrease if the capitalization rates increase.
• Some buyers exiting the market may lead to fewer purchases, creating opportunities.  
• Homeownership becoming more expensive leads to increased demand for renting homes.
• Compete more aggressively for cash purchases compared to financed offers.  

Strategic Questions  

Q: What mortgage options should I consider with rate increases?  

Answer

• The following options need to be taken into consideration:  
• If you plan on moving in under a decade, consider ARMs with low initial rates.  
• Opt for 15-year mortgages if higher payments are possible.
• Prefer FHA or VA loans if you qualify.  
• Buy from someone with a lower rate through assumable loans.  
• Sponsored buyers willing to contribute may offer temporary buydowns.  

Q: What measures can I take to prevent further Mortgage Rates Rise?  

Answer

• These strategies may be useful:  
• Hold rate as early as possible to secure as many benefits as possible.  
• Secure a better rate by paying points.  
• Cut the fixed-rate prefixed rate years instead of the usual 30 gives, which better rates.  
• Improve your credit score quickly to qualify for better rates and aid your financial future.
• A larger down payment could mean lower risk and better rates.  
• Check for lenders that allow a one-time adjustment if rates drop within a specific term.  

Q: What other financial actions besides the mortgage should I take during rate hikes?  

Answer

• When there is an increase in the economy-wide rates:
• Focus on paying off debt with high interest and variable rates first.  
• Assess debt levels and consider refinancing before further interest rate increases.
• Examine how your funds are distributed in the portfolio.  
• Invest in CDs or treasury bonds, which offer higher returns.
• Limit large, funded purchases if they aren’t necessary.