A  good way to predict which way mortgage rates are headed is to look at the 10-year bond yield. You can find it on finance websites alongside other stock tickers, or in the newspaper. (The use of the 10 year bond is due to the fact that a 30 year mortgage will payoff or refinance in approx. 10 years.) If it’s moving higher, mortgage rates probably are too. If it’s dropping, mortgage rates may be improving as well.

To get an idea of where 30-year fixed mortgage rates will be, use a spread of about 150 to 170 basis points, or 1.70% above the current 10-year bond yield. This spread accounts for the increased risk associated with a mortgage vs. a bond. So a 10-yr bond yield of 4.00% plus the 170 basis points would put mortgage rates around 5.70%. Of course, this spread can and will vary over time, and is really just a quick way to ballpark mortgage interest rates. Hope this makes sense....

#3

Treasury notes

3

I'm phoning a friend, Jason E. Gordon answer please.

2. Federal Reserve Lending Rate

The leading indicator is the ten year treasury notes. The market is sensitive to yield!

 What consumers choose to pay.

In general the instrucment that mortgages tend to follow (not identical just to give you an idea) would be the 10 year notes. That being said however there are many other factors to consider beyond that, banks will charge what they can so the market and competition play factors as well.

No me that I am sure.

Is this a test?

A roll of the dice?

I'd say the Federal Reserve is one of the main factors.

LIBOR one might say as well as the others you mentioned, but when the day is over; it is really consumers. If too high, they don't buy and the FED loosens rates to the market.

The market.

Annette,

Everyone gave great answers, and we have noting to add.  A

It is not as simple as it used to be. It is determined by the investor trends and where they are putting their money. Follow the money.

There are a lot of reasons for where the rates are

Trick question.  The correct answer is none of the above.  Largely, supply, demand, and competition determine rates.

Economic, geopolitical, and regulatory factors also play a role.

As soon as anyone starts gauging rates off the 10 year, it throws a curveball (not often, but it happens).  Same with the DOW.  

And then of course you have conventional/GSE loans, FHA loans, VA loans, and portfolio products like bank statement loans that all have different factors influencing each of them.  

10 year treasury note.... but every day is a new happening, isn't it!!!

Lending rate by Feds ......

The best answer is that several factors influence mortgage rates through a series of "ripple effects" throughout the market. In general, "bad news for the economy = good news for mortgage rates" (and vice versa). That said, similar to the stock market, there are constantly market analysts predicting trends ahead of time, then making in-flight adjustments as economic reports get published (which skews the rate sheets of various lenders who are relying on different information and/or strategies when adjusting their pricing). Hope that helps you Thomas J. Nelson, Realtor, CRS 

As Ken Jones mentions ... I do not believe it is any one thing.  I do know that some adjustabe notes are tied to bond rates ... but that is loan package specific. 

I'm with Ken Jones on this one

I just read a new blogger post on this a few days ago.

http://activerain.com/blogsview/5034324/what-drives-mortgage-rates-

Actually you would think supply & demand plays a part too

Annette Lawrence , Palm Harbor, FL 727-420-4041 2. Federal Reserve Lending Rate

I think it's the same guy in Vegas who sets the point spread for the Superbowl. But I could be wrong.

In bankers terms it is based on the federal funds rate which they add their yield. Also known as their profit. Profit is based on a curve determined by risk. SO when the fed raises their borrowing rates, mortgage rates will go up. There is then market forces meaning if no one is borrowing, rates can trend to the lower end of the curve. When new mortgage application rise, the rate stays near the top of the curve. 

the market