How Mortgage Rates Are Determined (And Why They Change)

If you're planning to buy a home or refinance your mortgage, one of the biggest factors you'll encounter is your interest rate. But how exactly are mortgage rates determined, and why do they change so frequently?

As a mortgage broker, I often hear questions like “Should I wait for rates to drop?” or “Why did the rate I saw online change today?” This blog will break it all down so you can make more informed decisions when it comes to locking in your mortgage.

What Affects Mortgage Rates?

Mortgage rates are influenced by a variety of national and global factors, including:

Inflation: Higher inflation generally leads to higher mortgage rates, as lenders need to preserve the purchasing power of the money they lend. Learn more about inflation.
The Federal Reserve: While the Fed doesn’t set mortgage rates directly, its decisions on interest rates heavily influence the market. Explore how the Fed manages rates.
Bond Market: Mortgage rates often follow the yield on 10-year Treasury bonds. When those yields rise, mortgage rates typically do too. Check current 10-year Treasury yield.
Economic Data: Reports on employment, GDP growth, and consumer spending can all impact mortgage rate trends. See the latest GDP report.

Factors That Affect Your Specific Rate

While national trends influence general rates, the rate you personally qualify for depends on:

Credit Score: Higher scores usually qualify for lower rates. Learn how to check your credit score.
Loan Type: Conventional, FHA, VA, and jumbo loans all come with different rate structures. Explore mortgage loan types.
Loan Term: 15-year mortgages often have lower rates than 30-year loans. Compare 15-year vs. 30-year loans.
Down Payment: Putting more money down can reduce your rate and eliminate mortgage insurance. What is PMI?
Debt-to-Income Ratio (DTI): A lower DTI shows lenders you’re less risky to lend to. How to calculate your DTI.

Why Mortgage Rates Change Daily

Mortgage rates can change daily — even hourly — based on what's happening in the financial markets. Lenders adjust rates in response to:

Market volatility
Federal Reserve announcements
New economic data releases
Global events or uncertainty

That’s why it’s important to lock in your rate at the right time — especially when rates are trending upward. Read more about rate locks.

When Should You Lock Your Rate?

There’s no one-size-fits-all answer, but a good rule of thumb is to lock your rate when you’re under contract or about to refinance, and the current rate meets your goals. I monitor rate changes daily and can guide you on the best time to lock based on your loan and timeline.

Work With a Mortgage Broker Who Tracks the Market

When you work with a mortgage broker, you get access to multiple lenders — and that means more opportunities to find a competitive rate that suits your financial situation.

I stay on top of market trends so you don’t have to. Whether you’re buying your first home, refinancing, or just exploring your options, I’m here to make sure you get the best rate possible for your needs.