Mortgage loan rates fluctuate around historical lows for several months. While economists expect rate hikes by the end of the year, there is no clear trend. Here’s a look at what might be driving the markets this week.
Tuesday National Association of Realtors to publish data on sales of existing homes in May. And on Wednesday, the federal government will release its monthly new home sales report. The reports do not affect mortgage rates, but sales statistics reflect the state of the housing industry, which was characterized by record low inventories and soaring house prices.
Also on the horizon are weekly jobless claims data on Thursday, as well as the latest revised estimate of economic growth for the first quarter, also on Thursday.
Mortgage rates rise and fall based on market sentiment, news headlines and various economic indicators. While calculating rates is tricky, here’s one simple rule of thumb: A 30-year fixed rate mortgage accurately tracks 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.