Mortgage rates are notoriously unpredictable, but they respond reliably to economic news: the Fed raising rates.
The biggest economic news of the week came on Wednesday, when the Fed’s Federal Open Market Committee concluded its May meeting with another rate hike widely expected. In March, the Federal Reserve raised interest rates for the first time in years, acknowledging that inflation was overheating. The inflation figure for March was as high as 8.5%.
The sharp rise in inflation over the past year has actually forced the Fed to raise interest rates. Skeptics say the central bank has been slow to respond to the highest inflation in decades.
The central bank has also scaled back economic stimulus from the pandemic. The Fed buys $120 billion worth of Treasuries and mortgage-backed securities a month, but has begun to slow the pace of purchases.
Almost everyone thinks that mortgage rates will go up 0.5 percent this week, which has caused rates to increase. It is not known if mortgage rates will move at all on news of the hike, as they have already been expecting it.
On Friday, the Labor Department will release the number of jobs for the month of April. This report will be important in determining the progression of the economic recovery, along with other items on the agenda.
The Federal Reserve doesn’t directly set mortgage rates, and calculating how much you’ll pay on a home loan is complicated, but here’s a simple rule of thumb: A 30-year fixed-rate mortgage accurately tracks the 10-year Treasury yield. When that rate rises, popular 30-year fixed-rate mortgages tend to do the same.
Fixed-rate mortgage rates are also affected by other factors, such as supply and demand. When mortgage lenders have too much business, they raise interest rates to reduce demand. When business is weak, they tend to lower prices to attract more customers.
The interest rate is ultimately determined by the investor who purchased your loan. Most U.S. mortgages are packaged as securities and resold to investors. Your lender offers you an interest rate that secondary market investors are willing to pay.
了解更多：
