How does the housing market impact mortgage rates?

The housing market significantly impacts mortgage rates, making the relationship between demand for housing, interest rates, and mortgage costs crucial to understand. When there is high demand for housing, borrowers may be more willing to pay higher interest rates to secure a home, which can lead to an increase in mortgage rates. Conversely, if demand is low, lenders may reduce mortgage rates to attract potential buyers.

Additionally, market conditions such as the overall economic climate and changes in monetary policy can influence interest rates. When the economy is strong, interest rates often rise due to inflation concerns, affecting mortgage rates accordingly. Conversely, during economic downturns, lower interest rates may be implemented to stimulate borrowing and spending.

This interconnectedness means that both the demand for housing and broader interest rates play pivotal roles in determining mortgage costs, making B the correct answer. The options that suggest only one factor influences mortgage rates or assert that the housing market has no effect are overlooking the complexities of economic interactions.