Mortgage rates they are notoriously difficult to predict. They rise and fall depending on market sentiment, news headlines and various economic indicators. Here’s a look at what might be driving the markets this week.
The big economic news comes Wednesday as the Federal Reserve Open Market Committee concludes its June meeting and Fed Chairman Jerome Powell speaks to reporters.
In April, the Fed discussed “tightening” its economic stimulus if the economic recovery continues to gain momentum. The Fed has bought $ 120 billion in Treasury bonds and mortgage-backed securities every month, but a reduction in these purchases will slow the pace of these purchases.
If Powell signals a move away from the Fed’s pandemic aggressive bond buying, the mortgage market will react.
The Fed does not directly control mortgage rates, and calculating the amount you pay for a home loan is difficult. But here’s one simple rule of thumb: A 30-year fixed-rate mortgage is exactly the same as the yield on 10-year Treasury bonds. When that rate rises, the popular 30 year fixed rate mortgage tends to do the same.
Fixed mortgage rates depend on other factors such as supply and demand. When mortgage lenders have too many businesses, they raise rates to reduce demand. When things go easy, they tend to cut rates to get more customers.
Ultimately, the rates are set by the investors who buy your loan. Most US mortgages are packaged in securities and resold to investors. Your lender offers you an interest rate that secondary market investors are willing to pay.