Calendar: What’s driving mortgage rates the week of July 12-16, 2021

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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 big economic news comes Tuesday, when the U.S. Labor Department releases its inflation report for June. Inflation jumped to 5 percent in May, and economists debate what that means. Did prices soar simply because the previous May’s economic activity ground to a halt amid a coronavirus-forced lockdown? Or are huge stimulus packages causing prices to rise?

While the rate of inflation doesn’t determine mortgage rates, the two metrics are correlated. And economists say a sustained spike in consumer prices would be accompanied by a rise in mortgage rates, which reached record lows in January.

 

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.

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Written by
Jeff Ostrowski
Senior mortgage reporter
Jeff Ostrowski covers mortgages and the housing market. Before joining Bankrate in 2020, he wrote about real estate and the economy for the Palm Beach Post and the South Florida Business Journal.
Edited by
Senior mortgage editor
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