Ever Wonder Why Mortgage Rates Change Daily?

Why mortgage rates change day-to-day

Source: Apartment Therapy

Mortgage rates are hot news right now, what with them hovering around all-time lows (yes- histoprically) yet again but beginning to inch higher.

And it seems everyone is interested to see if they can save a little money on their current mortgage payment via a refinance or get into a new home with a super low rate.

But while mortgage rates have been historically low years, they’ve also been extremely volatile as a result of all the government tinkering and the economy at large.

In the past month, interest rates have fluctuated between the low-to-mid 5% range and 6% or more. These major swings mean some buyers may be able to afford their dream home on Monday, but be priced out by Tuesday, at least until rates swing back down again. What’s behind these wild rate changes?
  • Mortgage rates tend to spike right after the Fed raises interest rates. While the two aren’t directly linked, higher interest rates do have an indirect impact on mortgage rates. 
  • Two other factors also put upward pressure on mortgage rates:
    • The Fed winding down its mortgage bond purchasing activity
    • Lenders raising their fees to make up for the drop in refinances
  • An increasing number of investors are buying up mortgage bonds to hedge against stock market volatility, which tends to push mortgage rates back down and adds to the volatility

Our take

The Fed has already signaled that it is going to raise rates again later this month. Buyers lock in your interest rate NOW. If you go into escrow/under contract in the next few days, you’ll be protected when rates respond to the Fed announcement. Buyers–if there’s a home you like, the best thing you can do is lock in your rate fast.

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