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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 Friday, when the U.S. Labor Department releases its jobs report for May. Unemployment soared into the double digits during the early months of the coronavirus pandemic, but the U.S. job market has rebounded strongly as the economy reopens.
The unemployment rate for April stood at 6.1 percent. Players in the mortgage industry will watch closely for signs that the labor market is accelerating or sputtering.
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.
On the horizon
On June 10, the Labor Department will release the consumer price index for May. Prices rose sharply in April — with the caveat that April 2021 prices were compared to the worst of the coronavirus shutdown a year earlier.
Price inflation is another factor that figures in to mortgage rates. When inflation is low, rates trend lower. When inflation picks up, so do fixed mortgage rates.