Mortgage rates go up and down based on market conditions, monetary policy and rate changes by the Federal Reserve as well as mortgage industry competition. Knowing how to predict the direction of mortgage rates can help you know when to take out a loan on a new home, or refinance your existing home loan. Your personal mortgage rate offers can be influenced by your credit history, outstanding financial obligations and your income level. Predicting general mortgage rates can be used as an indicator of your potential mortgage rate offers.
Step 1
Understand the common types of mortgages. Mortgages are offered for different time periods such as 15 or 30 years and may be given as a fixed-rate or variable-rate mortgage. Some mortgages will combine elements of fixed and variable-rate mortgages with a fixed rate during an introductory period and an adjustable rate after a specified period of time such as 3 or 5 years. Some lower-cost home loans may be offered for first-time home buyers, for members of the military or for individuals in rural areas.
Step 2
Create a tracking sheet. List the type of loans you want to predict in the left column on the tracking sheet. Place the date of mortgage rate collection on the top row of the document. Consider including multiple types of loans to help gauge any mortgage rate variations by type.
Step 3
Insert the mortgage rates on your tracking sheet daily for at least a week. Convert the results into a graph that indicates the current direction of mortgage rates. If the rates on your graph are increasing, generally rates will continue in the same direction in the short term. Likewise, decreasing rates on your graph indicate rates may continue to decrease. The longer your tracking time period, the greater your prediction accuracy.
Step 4
Read financial news articles that provide expert commentary on mortgage rates. Review their options and evidence for rate changes and deviations from current trends. Also review any political actions or new laws that could change mortgage rates through government support programs and financial institution restrictions. Use this information to adjust your tracked mortgage rate prediction.
Step 5
Monitor economic indicators for longer-term mortgage rate movement predictions. Review the consumer price index, gross domestic product report, unemployment numbers, consumer credit and housing starts. In general, good reports indicate potential inflation which causes interest rates to increase. Negative reports often cause interest rates to decrease. Modify your mortgage rate predictions based on the reaction to economic indicators rather than the actual rates provided.
Step 6
Consider the Federal Reserve meeting schedule and determine the potential impact on current mortgage rates. Changes in the Federal Reserve discount rate can have an immediate impact on mortgage rates after they are announced. Adjust your mortgage rate predictions around potential Federal Reserve actions.
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