Mortgage rates have been hovering near all-time lows for several months, but rose sharply last week. And while economists expect interest rates to rise in the coming months, home loan rates have slipped into a pattern: They go up, they go down and then they repeat. Here’s a look at what could move the markets this week.
On Thursday, the National Association of Realtors will release its report on home prices and home sales for December. The report itself won’t move mortgage rates, but the data will give new insight into the inflamed housing market. The group of commercial brokers said last month that home prices rose 13.9 percent over the past year, while inventories of homes for sale remain near record lows.
Also looming is the weekly jobless claims and housing starts data for November, both of which are due to be released on Wednesday. And, as always, mortgage rates and yields on 10-year government bonds will quickly be combined.
Mortgage rates go up and down based on market sentiment, headlines, and a variety of economic indicators. The math behind interest rates is complicated, but here’s an easy general rule of thumb: A 30-year fixed-rate mortgage closely tracks the 10-year Treasury bond yield. When that rate goes up, a popular 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 a lot of business, they raise rates to reduce demand. When the business is light, they tend to lower prices to attract more customers.
Ultimately, the rates are set by the investors who buy your loan. Most US mortgages are packaged as securities and resold to investors. The lender offers you an interest rate that secondary market investors are willing to pay.