Mortgage rates have hovered near all-time lows for months, but they moved up sharply last week. While economists expect rates to rise in the coming months, interest rates on home loans have fallen into a pattern: They rise, retreat and then repeat. Here’s a look at what could move 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 white-hot housing market. The Realtors trade group said last month that home prices were up 13.9 percent over the past year, while inventories of homes for sale remain near record lows.
Also on the horizon are weekly jobless claims data and housing starts for November, both set for release Wednesday. And, as always, mortgage rates and yields on 10-year government bonds will be joined at the hip.
Mortgage rates rise and fall based on market sentiment, headlines and a variety of economic indicators. The math behind 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.