So, if you're in the market for a new place, you've likely been keeping tabs on mortgage rates, right? It's been quite a rollercoaster in the past few years—started off hitting crazy lows, then shot up like fireworks, and now they're taking a bit of a dip. Ever thought about why that's happening?

The answer isn't simple because there are many things that can affect mortgage rates. Let me walk you through some of the most influential factors.

Inflation and the Federal Reserve

So, here's the deal – the folks over at the Federal Reserve don't exactly call the shots on mortgage rates. But here's the twist: they do play puppet master with the Federal Funds Rate, dancing it up or down based on things like inflation, the economy, job numbers, and whatnot. And guess what? When they pull those strings, mortgage rates usually do a little dance of their own. Business Insider breaks it down like this:

““The Federal Reserve slows inflation by raising the federal funds rate, which can indirectly impact mortgages. High inflation and investor expectations of more Fed rate hikes can push mortgage rates up. If investors believe the Fed may cut rates and inflation is decelerating, mortgage rates will typically trend down.””

— Business Insider

In the recent past, the Fed decided to crank up the Federal Fund Rate, hoping to tackle inflation head-on. The side effect? Mortgage rates followed suit and shot up. The good news, though, is that the smarty-pants experts are predicting a positive shift in both inflation and mortgage rates as the year unfolds. Take it from Danielle Hale, the Chief Economist over at Realtor.com – she's got the scoop:

““[M]ortgage rates will continue to ease in 2024 as inflation improves . . .””

— Danielle Hale, Chief Economist at Realtor.com

Guess what? There's chatter going around that the Fed might actually pull a move and lower the Fed Funds Rate this year. Why, you ask? Well, it seems like inflation is cooling down, even though it hasn't quite hit the ideal target they have in mind.

The 10-Year Treasury Yield

Oh, and here's another thing: mortgage companies keep a close eye on something called the 10-Year Treasury Yield to figure out how much interest to slap onto those home loans. It's like this: if the yield decides to take a hike, mortgage rates tend to tag along for the ride. And guess what? It works the other way around, too. According to the folks over at Investopedia, it's all about that back-and-forth dance.

““One frequently used government bond benchmark to which mortgage lenders often peg their interest rates is the 10-year Treasury bond yield.””

— Investopedia

Let's take a trip down memory lane – usually, there's this steady gap between the 10-Year Treasury Yield and the 30-year fixed mortgage rate. But, hold on to your hats, because recently, things have been a bit different. What's that mean? Well, it suggests there's some wiggle room for those mortgage rates to take a dip. So, if you're curious about where the mortgage rates might be headed, just keep a close watch on the trend of that treasury yield. It's like a crystal ball for the experts.

Bottom Line

Alright, buckle up because the Fed's got a meeting on the agenda this week, and you better believe the industry hotshots will be glued to their seats, waiting to see what they decide and how it's going to shake up the economy. If you're gearing up for some changes in mortgage rates and want to keep your moving plans on track, it's smart to have a squad of professionals in your corner. They've got your back in this rollercoaster ride.