Mortgage rates are controlled by the action of rising and falling stocks & bonds. When stocks rise, investors take a "flight to safety."
A flight to safety happens when investors are nervous about owning risky assets like stocks, but do not want to miss out on earning a return on their funds, so they allocate money into risk-free U.S Treasury debt to provide a safe-haven AND an investment return. To remind readers, as benchmark Treasury yields fall, prices of mortgage-backed securities move higher, which allows lenders to offer lower mortgage rates. As Treasury yields rise, mortgage-backed security prices are led lower, which forces lenders to push mortgage rates higher.
I hope this helped everyone (esspecially those seeking a mortgage loan in the near future) understand how the Fed generates mortgage loan rates. This was just a cursory glance, if you have more questions feel free to leave me a comment here or e-mail me with your request.
MortgageSmith101@yahoo.com
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