Mortgage rates are notoriously unpredictable, but housing economists expect them to edge up in the coming months. Two items are on this week’s economic calendar could shape the future of mortgage rates.
This week’s first bit of must-watch economic news comes Tuesday, when the Federal Housing Finance Agency unveils its conforming loan limits for 2022. That number is the line of demarcation between conforming loans and jumbo loans. With the housing market on fire, the limit could near $1 million in high-cost areas such as coastal California and New York City.
A second piece of noteworthy news comes Friday, when the U.S. Labor Department releases its jobs report for November. Unemployment soared into the double digits during the early months of the coronavirus pandemic, but the U.S. labor market has come back strong.
The unemployment rate for October stood at 4.6 percent. Players in the mortgage industry will watch closely for signs that the labor market is accelerating or sputtering.
The Fed doesn’t directly dictate mortgage rates, and the calculus behind how much you pay for a home loan 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.
Rates ultimately 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.