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What Drives Mortgage Rates?

Mortgage interest rate
Mortgage rates rise and fall based on market sentiment, headlines, and a variety of economic indicators.

By Manuel Tovar, September 20 – Hispanic Solutions Group

Known is that mortgage rates have remained near record lows for several months. While economists expect rates to rise later this year, a clear trend has yet to emerge. Here’s an overview of what the mortgage markets could move into.

The National Association of Realtors will release existing home sales data for July. The report itself doesn’t boost mortgage rates, but the sales statistics reflect the state of the housing economy, which has been characterized by record inventories and rising home prices.

Mortgage rates rise and fall based on market sentiment, headlines, and a variety of economic indicators. While the calculation behind rates is complicated, today we hit you with a simple rule: the 30-year fixed-rate mortgage closely tracks the yield on 10-year Treasuries. When that rate goes up, the 30-year fixed-rate mortgage tends to do the same.

Fixed mortgage rates are influenced by other factors, such as supply and demand. When mortgage lenders have too many businesses, they raise rates to lower demand. So when business is light, they tend to lower rates to attract more customers.

Finally, interest rates are set by the investors who purchase your loan. Most American mortgages are packaged as securities and resold to investors. Your lender offers you an interest rate that secondary market investors are willing to pay, because it is their financial world and they know it so well.

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