Why have rates been trending higher and what does make them rise or fall? Is it the Fed? Inflation? The banks? Fannie Mae or Freddie Mac? Is it is secret conspiracy?
The answer is that it rates move based on a number of related factors, including you and me, the consumer or the "end investor".
Mortgage money can come from a variety of sources. Most of it comes from investors called "capital markets." This is where investors interested in purchasing debt instruments (bonds) come to buy these products. Sellers must attract these buyers by competing with a variety of products with different rates of risk and return over given periods of time. Many of these products include US Treasuries, corporate bonds, foreign bonds, etc.
Who is the "end investor"? Consumers are the end investor. If you are buying bonds, and let's say stocks are paying more, will you keep your money in bonds? The answer for most people is no, depending on the risk versus return. So, when people take money out of the bond market, rates will then rise. And, vice versa, when people take money out of the stock market and put it into the bond market, rates will get lower.
This is the easiest way to explain the market for mortgage rates. This makes up most of the explanation. There are also other factors involved, but it is mostly based on the bond market, which is controlled by the "end investor" meaning the consumer.
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