The simple answer to that is that lenders do not set the rates at all. All lenders do is approve and reject those who apply for the mortgage in the first place. The rates that mortgages go with are determined bit by the bank or financial institution but by the secondary market. This is the place where mortgage are bought and where they are sold.

Two of the most famous mortgage investors are Fannie Mae and Freddie Mac and they were set up by the government in order to make the entire process of getting a mortgage, both applying and getting approved, or not, easier and smooth. They thought that the entire process should be more efficient. So now these types of investors buy the mortgages that are out there and then hold onto them in what is known as a portfolio and sometimes they are bundled into securities. These bundles are then sold to other investors and they are often traded just like any other investment on Wall Street.

So it is this secondary market that says what the mortgage rates are going to be, not your lender. The interest rates will not stay constant however. Since they are investments just like any other their interest rates will fluctuate. For example when the market is on the way up the mortgage rate will be too and the opposite is true when the market is going down.

The interest rates on most markets seem to be cyclic, meaning that it goes around in cycles round and round all of the time. For example it seems to be that when bonds are going up interest rates seem to be going downwards. This is what is known as a financial trend. Knowing these trends can help you out in a big way.