The rates of mortgages fluctuate according to deviations in fundamental economic elements that work together to establish a particular rate at a specific point on the cycle of an economy. Financiers regularly observe economic activities related to the mortgage market to try and make the most out of earnings from loaning activities during times of weak and steady economic growth. 

Mortgage rates have a very significant impact on the overall cost of San Diego real estate through financing. On the one hand, mortgage borrowers are looking for the lowest possible mortgage rates. On the other hand, mortgage financiers have to manage their risk through the mortgage rates they charge. The least interest rates are only available to mortgage borrowers with the most robust finances and excellent credit histories.

While your financial health as a borrower can affect the mortgage rate you will get, government fiscal policy and significant economic factors impact the whole mortgage rate world. You can narrow them down to the financial factors outlined below. All of them represent the basic rules of demand and supply in one way or another. It is somehow complex, but understanding these principles will give you an excellent way to think of what you are paying now and what could be looming in the future.

Housing market conditions

Trends and conditions of houses in San Diego affect mortgage rates. When fewer houses for sale in San Diego are being offered for resale or built, the decline in home purchases results in a drop in the demand for mortgages and reduces the interest rates. The other trend that causes the reduction of mortgage rates is an increasing number of individuals who opt for renting a home rather than buying. Such changes in the availability of houses for sale in San Diego and consumer demand impact the levels at which mortgage financiers set interest rates.

The bond markets

Investment firms and banks sell mortgage-backed securities as investments. The income generated from these debt securities must be sufficient enough to attract buyers. This is, in part, affected by the fact that corporate and government bonds offer competing investment products. The money you can save on these competing investment products impacts the interest rates the mortgage-backed securities provide. Financiers have to generate sufficient interests for mortgage-backed securities to make them competitive in the overall debt security market.

Federal reserve economic policy

The economic policy taken up by the Federal Reserve Bank is among the most crucial factors affecting both the general economy and mortgage rates. Although the Federal Reserve Bank does not set the specific mortgage rates for houses in San Diego, its actions in determining the federal funds’ rates and adjusting the rate of money supply have a significant impact on the mortgage rates available to the borrowers. In general, increasing the supply of money reduces the mortgage rates while reducing the supply of money raises mortgage rates. 

Economic growth

Economic growth changes can cause a decrease or increase in mortgage rates for houses for sale in Los Angeles. An increased economic growth results in an increase in the levels of interest in a particular economy, which leads to a rise in mortgage rates, and vice versa. 

The indicators of economic growth, such as the rate of employment and gross domestic product, also impact mortgage rates for San Diego real estate. When people have high incomes and higher levels of consumer spending, more consumers seek for mortgage loans, which propels mortgage rates upwards. The opposite is also true.


The upward movement of prices as a result of inflation is a crucial factor in the overall economy and an essential element for mortgage financiers. Inflation reduces the purchasing power of money over time. Mortgage financiers must retain their interest rates at levels that can withstand the erosion of purchasing power of dollars through price increases to make sure the interest they earn represents an actual net profit.

For instance, if mortgage rates for houses for sale in Los Angeles are 4.5%, but the annual rate of inflation is 1.6%, then the interest on a loan in terms of the purchasing power of a dollar the lender earns is only 2.9%. Therefore, mortgage financiers carefully track the rates of inflation and adjust their mortgage rates correspondingly.


To remain in front of economic decline and growth, mortgage financers usually research the economic situations to determine how the economy will likely do in the near and long future. Forecasting the economic situations provides mortgage lenders an insight on how mortgage rates are expected to behave in the future. For instance, sustainable economic growth can encourage inflation. If the lenders expect inflation to occur, they might adjust their mortgage rates upwards to keep up with inflation. 

The condition of the mortgage market

The rates of mortgages are also influenced by the expansions in the real estate business that assist in indicating the potency of demand for home equity loans. For example, mortgage financiers track how new homes are constructed and sold. If there is an increase in construction and sales, mortgage lenders expect the interest rates to increase, putting upward pressure on mortgage rates. On the contrary, declining construction and sales of new houses imply a weaker demand for mortgages, reducing the rates of interest.

Can changing mortgage rates impact your existing mortgage?

The answer to this question depends on the type of mortgage you have. If you have a fixed-rate mortgage, your initial mortgage rate will not change until your home loan is completely paid off. That is not the case when you have a home mortgage with a variable rate of interest, commonly known as an adjustable-rate mortgage. 

This type of mortgage starts with a lesser interest rate than a majority of fixed-rate mortgages. That initial rate is usually locked in for a specified period, after which your rate of interest is subject to change. How often and how high the interest rate can change is dependent on interest rate fluctuations and the terms of your mortgage. However, most adjustable-rate mortgages have specified rate limits that control how high your mortgage rate can change.

If you already have a mortgage, monitoring the interest rates can assist you in deciding whether it is a good time to repay your mortgage. However, your ability to get better mortgage rates not only depends on how rates are trending, but also your financial profile, credit history, and other factors.