Calendar: What determines mortgage rates the week of September 20 to 24, 2021
Mortgage rates go up and down for a variety of reasons. Market sentiment, the latest headlines and a list of economic indicators all play a role.
The must-see economic news this week arrives Wednesday, when the Federal Reserve’s Open Markets Committee wraps up its September meeting. Fed Chairman Jerome Powell is expected to address reporters.
In recent months, the Fed has discussed a “taper” in its pandemic-inspired economic stimulus measures if the economic recovery continues to gain momentum. The Fed bought $ 120 billion worth of Treasury bonds and mortgage-backed securities each month, but a decrease would mean a slowdown in the pace of those purchases. All of these bond purchases have helped keep mortgage rates low.
Another variable is inflation. While inflation had exceeded 5% in recent months, price increases appeared to be easing in the latest official report. “Reading inflation lower than expected allows the Fed to postpone any cutback decision beyond the September 22 meeting and take the time to assess the impact of the Delta variant on the economic recovery.” said Greg McBride, chief financial analyst at Bankrate.
The Fed doesn’t directly control mortgage rates, and calculating how much you pay on a home loan is complicated. But here’s a simple rule of thumb: The 30-year fixed rate mortgage closely tracks the yield of the 10-year Treasury. When that rate rises, so does the popular 30-year fixed rate mortgage.
Fixed rate mortgage rates 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.
The rates are ultimately set by the investors who buy your loan. Most US mortgages are packaged in the form of securities and resold to investors. Your lender offers you an interest rate that secondary market investors are willing to pay.