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Mortgage rates are notoriously 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 markets this week.
The major dose of economic news comes Friday, when the U.S. Labor Department releases its jobs report for July. Unemployment soared into the double digits during the early months of the coronavirus pandemic, but the U.S. labor market has rebounded strongly — in fact, the economy is running so hot that the Federal Reserve has raised interest rates repeatedly in 2022.
The unemployment rate for June stood at just 3.6 percent, a number that fits any definition of full employment. Players in the mortgage industry will watch closely for signs that the labor market is accelerating or sputtering.
The calculus behind mortgage rates is complicated, but here’s one easy rule of thumb: The 30-year fixed-rate mortgage closely tracks the 10-year Treasury yield. When that rate goes up, the popular 30-year fixed-rate mortgage tends to do the same.
Rates for fixed mortgages are influenced by other factors, such as supply and demand. When mortgage lenders have too much business, they raise rates to decrease demand. When business is light, they tend to cut rates to attract more customers.
Ultimately, rates are set by the investors who buy your loan. Most U.S. mortgages are packaged as securities and resold to investors. Your lender offers you an interest rate that investors on the secondary market are willing to pay.