Calendar: What drives mortgage rates for the week of November 8-12, 2021

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Mortgage rates are notoriously difficult to predict. They rise and fall based on market sentiment, headlines and a variety of economic indicators. Here’s a look at what could move the markets this week.

The big business news comes on Wednesday when the US Department of Labor releases its October inflation report. Inflation rose to an annual rate of 5.4 percent in June and has remained above 5 percent for months.

Economists discuss what these hot readings mean. Have prices soared because last summer’s economic activity stalled amid a coronavirus lockdown? Or are huge stimulus packages causing prices to rise? When can congested supply chains unravel?

While the rate of inflation does not determine mortgage rates, the two metrics are highly correlated. Inflation – and the Federal Reserve’s response to rising prices – could be the most important metric for mortgage rates in the months ahead.

Economists say a sustained rise in consumer prices would be accompanied by a change in Fed policy and a rise in mortgage rates, which hit record lows in January. The Fed announced last week that it would slow its asset buying pace, but did not say when it expected a rate hike.

“Inflation has increased, largely reflecting factors that are likely to be temporary. Supply and demand imbalances related to the pandemic and the reopening of the economy have contributed to significant price hikes in some sectors, “the Federal Reserve said in a statement on Wednesday.

The calculation behind mortgage rates is complicated, but here is a simple rule of thumb: The 30-year fixed-rate mortgage is closely aligned with the 10-year treasury yield. When that rate goes up, the popular 30-year fixed-rate mortgage tends to do the same.

Fixed-rate mortgage rates are affected by other factors such as supply and demand. When mortgage lenders have too much business, they raise interest rates to reduce demand. When business is weak, they tend to lower prices to get more customers.

Ultimately, the interest rates are set by the investors who buy your loan. Most US mortgages are packaged as securities and resold to investors. Your lender is offering you an interest rate that investors are willing to pay in the secondary market.

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