How Often Do Mortgage Rates Change?

Mortgage rates fluctuate based on market pricing, just like stock, bond, or gas prices. As a result, the baseline mortgage rate you might qualify for can change daily, sometimes multiple times in a single day. Various economic factors and market conditions, including inflation, contribute to the change in mortgage rates. 

The frequent rate fluctuations can create uncertainty and impact how much home you can afford. If mortgage rates rise, higher monthly payments could push your desired home out of reach. On the other hand, if rates fall, you may qualify for that house with the extra bedroom. Even a seemingly small change in mortgage rates can affect your buying power.

In this article, we’ll cover when and why mortgage rates change in order to help you better understand the market.

When do mortgage rates typically change?

Mortgage rates fluctuate when the market learns new information, and do not change based on the day of the week or month. For instance, the jobs report, which typically comes out on the first Friday of the month, provides a snapshot of the state of the economy. This report has the potential to raise or lower mortgage pricing during that period of the month. When there are no new sources of information, mortgage rate movements may be relatively quiet. It’s all about what and when new information changes expectations.

Working with a knowledgeable loan officer can help you navigate when mortgage rates could potentially be more volatile. Depending on your financial situation, you can decide to secure a rate that puts your desired home within reach, or take the gamble to see if rates fall after an information event.

Why do mortgage rates change?

The volatility of the housing market and other economic factors cause mortgage rates to change daily. Here are some of the most common reasons mortgage rates change:

The Federal Reserve

The Federal Reserve (Fed) is the government entity in charge of the federal funds rate, which is the interest rate at which banks can lend money to each other. While the Fed doesn’t directly set mortgage rates, its monetary policies regarding the open market and banks directly influence the interest rate environment, indirectly affecting the cost of borrowing money. 

Mortgage rates can still go up even if the Fed lowers its federal funds rate. This is because the market looks ahead. If the Fed hints that it might not lower rates as much as people thought, mortgage rates could rise as investors react to this new information. 

Financial markets

Lenders follow the 10-year Treasury yield curve to set the benchmark for rates on fixed-rate mortgages. Treasury notes are the most highly traded assets on the financial markets, which makes the 10-year Treasury yield one of the key barometers of economic growth expectations.

Government policies

Changes in government policies related to housing and finance can also affect mortgage rates. For example, modifications to regulations of government mortgage-backed securities or changes in government-sponsored enterprises (GSEs) like Fannie Mae and Freddie Mac can also influence the mortgage market and rates you see.

Global events

International economic and political events can also impact mortgage rates in the U.S. Major global events, such as geopolitical tensions or financial crises in other countries, can push investors to seek safer investments in the secondary market. If a lot of investors want the mortgage-backed securities, the mortgage rate does not need to be as high to attract these investors.

Economy

The overall health of our economy, including factors like GDP growth, employment rates, and consumer spending, can influence mortgage rates. Generally, a strong economy is associated with higher interest rates, while a weaker economy is associated with lower interest rates. Since markets are forward-looking, current mortgage rates already reflect this information about the economy. However, when new data emerges that indicates the economy is stronger or weaker than previously anticipated, mortgage rates may adjust accordingly.

Inflation

Inflation is also a significant factor in determining mortgage rates. Higher inflation expectations will generally lead to an increase in mortgage rates, as lenders try to maintain their profit margins to protect against the eroding value of money over time. In a weak economy, high inflation can also interrupt the stimulation of borrowing and spending, further influencing mortgage rates.

When is the best day to lock in your mortgage rate?

The best time to lock in your mortgage rate is when you’re under contract to buy a home and are most comfortable with the rate you're offered. You generally cannot lock in a rate unless you’re under contract. Locking in your rate means the lender agrees to guarantee a specific interest rate for a set period, usually 30-60 days, protecting you from any rate increases until it expires. Lenders will allow you to extend your rate lock for a fee, based on the amount of your loan. 

You should time your rate lock with your personal financial circumstances, rather than market conditions. Although mortgage rates can fluctuate when markets learn new information, like around economic data releases, these fluctuations can go both ways — rates may rise or fall.

If you get a rate that aligns with your financial and homeownership goals, and the lender allows for lock-ins, taking advantage of a rate lock is a good idea. 

See what mortgage rates you may qualify for with us at Zillow Home Loans*.

*An equal housing lender. NMLS #10287