There are no crystal balls where the mortgage market is concerned, but if you train your eye to follow the economy like an investor, you may find yourself becoming a bit of a rate wizard.
What to Watch
Mortgage rates are influenced by the buying and selling of mortgage-backed securities (MBSs). Follow these indicators in order to determine which way the market will run:
The 10-Year Treasury Bond
More investment into these bonds means more profit for banks, and ultimately lower mortgage interest rates. Investment into bonds normally increases with greater national or geopolitical tensions, as bonds are a safe haven for risk. Compare with the stock market, which behaves in contrast to the bond market.
Federal Reserve Policies
Recently rates have been kept nice and low thanks to the Fed’s billion dollar bond buying program, which has a similar effect on rates as 10-year treasury bonds. This program is called quantitative easing (QE). As the Fed backs off of QE, rates will likely go up.
Finance Sector News
Economic reports are released weekly, and many of them contribute directly to investor decisions to buy into more bonds or stocks, which in turn influence mortgage interest rates. Some key market movers are:
Monthly Jobs Reports
Service and Retail Industry Productivity
Gross Domestic Product Readings
FOMC Meeting Minutes
Industrial Manufacturing Output
Remember, a healthier the economy and calmer the political climate bring about more investment in stocks and less in bonds. So when you hear good news about production it will mean more costly mortgage interest rates.