Quick answer: Mortgage rates move mainly with the bond market, especially the 10-Year Treasury yield, which responds to inflation, economic growth, Fed policy and global events. Demand for mortgage-backed securities also matters. Your own rate depends on your credit score, down payment, loan type and lender.
Mortgage rates change every day. They move with the bond market, which responds to inflation, economic growth, Fed policy and world events, and your own rate also depends on your credit, down payment and lender. Here are the main factors.
1. Federal Reserve Policy
The Fed does not set mortgage rates, but its decisions and signals about future policy influence inflation expectations and bond yields, which affect mortgage rates. See How the Federal Reserve Affects Mortgage Rates.
2. Inflation
When inflation rises, investors want higher yields to make up for lost purchasing power, which tends to push mortgage rates up. Lower inflation tends to help rates fall.
3. Economic Growth and Employment
A strong economy with low unemployment can push yields and mortgage rates up. A slowdown can pull them down, as investors move toward safer assets and expect the Fed to ease.
4. The Bond Market and the 10-Year Treasury
Mortgage rates are closely tied to the yield on the 10-Year Treasury. When investors buy Treasuries, yields fall and mortgage rates tend to follow. When investors sell them, yields rise.
5. Mortgage-Backed Securities and the “Spread”
Most mortgages are packaged into mortgage-backed securities (MBS) and sold to investors. Mortgage rates equal a base yield plus a spread that reflects investor demand, market volatility and the risk that borrowers will refinance or pay off early. When that spread widens, mortgage rates rise even if Treasury yields do not.
6. Global Events and Market Volatility
Geopolitical tensions, financial crises and other shocks can send investors toward safer assets such as Treasuries, which can lower yields and, often, mortgage rates, at least temporarily.
7. Your Own Profile and Your Lender
Your personal rate depends on your credit score, down payment, loan type, property type and whether you pay points. Lenders also price differently based on costs and risk appetite, so comparing offers matters.
So What Should You Watch?
Rather than trying to time the market, watch the 10-Year Treasury and inflation news, and compare actual quotes. A loan officer can show you how today’s rate compares to your goals.
Frequently Asked Questions
Why do mortgage rates change every day?
Because they are priced off bond markets that trade continuously and react to economic data, inflation news, Fed commentary and world events.
Does my credit score affect my mortgage rate?
Yes. A higher score generally qualifies you for a lower rate, along with your down payment, loan type and property type.
What is the best time to lock a mortgage rate?
No one can time rates reliably. A rate lock protects you from increases while your loan is processed, so ask your loan officer when locking makes sense for your timeline.
Next step: Your rate is more than the market. See how your credit, down payment and loan type affect what you could get.
No obligation. You will answer a few quick questions about your home purchase so we can offer you the best options. It only takes a few minutes.
Sources
- Freddie Mac, Primary Mortgage Market Survey
- Federal Reserve H.15 via FRED, 10-Year Treasury yield
- Federal Reserve, FOMC meeting calendars and statements
Tithe Lending LLC | NMLS #2439006 | Equal Housing Lender. General information only; not a loan offer or financial, tax or legal advice.