Mortgage rates seem mysterious, but they respond to a handful of understandable forces. Knowing them helps you make sense of the headlines.
The big drivers
- Inflation: higher inflation tends to push rates up
- The bond market, especially mortgage-backed securities and the 10-year Treasury
- Federal Reserve policy, which influences the broader rate environment
- The overall strength of the economy and the job market
The Fed does not set your mortgage rate
A common misconception is that the Federal Reserve sets mortgage rates directly. It sets a short-term rate that influences the economy, but your 30-year mortgage rate is driven more by the bond market and inflation expectations.
Why your rate is personal
On top of market rates, your specific rate depends on your credit, loan type, down payment, and the property. Two people can shop on the same day and get different rates.
Rates change daily and depend on your full picture. The only way to know your real rate is to talk through your specific scenario.