Mortgage loan interest rates are constantly changing. Like most other financial products, mortgages can be traded on a secondary market. This is the exchange where lenders are able to sell their existing loans to investors. When a lender sells their loans, this frees up capital in order for them to make more loans to borrowers. In return, the investor is able to earn a certain percentage on their money over the life of the loan.
Historically, low interest rates are typically accompanied by a weak and slumping economy. This is because the investors will be searching for a safe place for their money rather than in than in stocks or other types of bonds. On the reverse side of this, if the economy is expanding and investor confidence is high, interest rate typically increase. The interest rates have to increase in order to give investors an incentive to invest their money.
During the last several years, it has been even more difficult to predict the direction of rates. The Federal Reserve and Government have been buying bonds and mortgage backed securities in order to keep interest rates low and hopefully stimulate the economy. Interest rates have been near or at historic lows for several years now. They will be heading higher but nobody knows for sure when this will occur. Since this is the case, it is important to get locked into your low interest rate as soon as possible. Two outcomes are certain, interest rates will rise and interest rates can go higher a lot quicker than they go down!