Most people assume the Federal Reserve simply decides mortgage rates.

It is more complicated than that.

Mortgage rates are influenced by several things:

• Inflation
• Jobs reports
• Economic growth
• Treasury yields
• Federal Reserve policy
• Investor demand for mortgage bonds
• Government borrowing

Inflation is especially important.

If investors believe inflation will stay high, they normally want a higher return for lending money.

That pushes bond yields and mortgage rates higher.

If inflation slows and the economy weakens, investors may move money into bonds. Bond yields can fall, helping mortgage rates.

That is why mortgage rates can change before the Federal Reserve ever changes its own rate.

The mortgage market is constantly looking ahead.

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