From the beginning of lending, people would lend thier money for an interest "yeild". If I lend you $100 today, then you owe me the $100, plus 10% interest over a 30 day period.
Well, mortgages are a magnified version of the example above.
Mortgage rates are based off of many different sources. The main source is the treasury bond. This is what supplies all the banks with the money to lend for mortgages. The main treasury to look at is the 10 yr. bond. When the yeild goes up, mortgage rates go up. Is this the only source? NO. Mortgage backed securities are another instrument used to lend money in the mortgage arena. However, nobody can see what they do on a daily basis unless they subscribe to a service for a monthly fee. This is why most mortgage professionals just look at how the 10 yr. yield is doing on any given day.
What makes the yeild rise and fall? As a whole: The economy. Traders on Wallstreet move money from stocks to bonds and vice versa. When there is any negative news regarding the economy (consumer confidence, gross domestic product, inflation, corporate earnings, fed meetings, etc.) traders take thier money out of stocks and secure them in bonds. This inflates the supply of money in the bond market and allows the yield to drop. If there is good news in the economy, traders will do the opposite by taking thier money out of the safety of bonds and putting it back into the higher yielding stock.
Also remember that traders base all of thier decisions on forecasting of economic news. So, you may not see a big move in the market if economic news is "as expected", like the fed raising rates .25%. You didn't see rates move because that was expected by traders and already adjusted.
To simplify this whole equation, help your clients by advising them to just look at the 10 yr. bond yield. It can be found posted publically on many news web sites. Just remember, when you look on these web sites, there is a 20 minute delay from when the actual last change was made. This is set mandatory by Wallstreet. Those who subscribe to "real time" quotes can see what the yield is doing in "real time".
I hope this helps clarify any questions people may have about why mortgage rates rise and fall.
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