Calendar: What determines mortgage rates the week of July 12-16, 2021


Mortgage rates are notoriously difficult to predict. They go up and down based on market sentiment, headlines, and various economic indicators. Here’s a look at what could move the markets this week.

The big economic news comes Tuesday, when the US Department of Labor releases its inflation report for June. Inflation jumped to 5% in May, and economists are debating what that means. Did prices soar simply because economic activity the previous May came to a halt amid a forced lockdown by the coronavirus? Or are huge stimulus packages driving up prices?

Although the rate of inflation does not determine mortgage rates, the two measures are correlated. And economists say that a sustained rise in consumer prices would be accompanied by a rise in mortgage rates, which hit record lows in January.

Calculating mortgage rates is complicated, but here’s a simple rule: 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.

Ultimately, the rates are 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.

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