Mortgage rates are known to be difficult to predict. They rise and fall based on market sentiment, headlines and a variety of economic indicators. Here’s a look at what could move the markets this week.
The big business news comes on Friday when the US Department of Labor does its Job report for June. Unemployment hit double digits in the first few months of the coronavirus pandemic, but the U.S. job market has rallied sharply as the economy re-opened.
In May the unemployment rate was 5.8 percent. Players in the mortgage industry will be vigilant for signs of acceleration or stuttering in the labor market.
The calculation behind mortgage rates is complicated, but here is a simple rule of thumb: The 30-year fixed-rate mortgage is closely aligned with the 10-year treasury yield. When that rate goes up, the popular 30-year fixed-rate mortgage tends to do the same.
Fixed rate mortgage rates are affected by other factors such as supply and demand. When mortgage lenders have too much business, they raise interest rates to reduce demand. When business is weak, they tend to lower prices to get more customers.
Ultimately, the interest rates are set by the investors who buy your loan. Most US mortgages are packaged as securities and resold to investors. Your lender offers you an interest rate that investors are willing to pay in the secondary market.