Investor Demand

Here's how the secondary market affects you as a would-be homebuyer. Investors want to earn the best return possible. That level of return is determined by the current and anticipated condition of the economy. When the economy is on an upswing, future yields are expected to be better than current yields. Investors, therefore, will hold off buying until higher yields materialize. This drives mortgage interest rates up, because lenders cannot sell their loans at lower yields.
Conversely, when the economy is in a downturn, investors buy up what's available to avoid being stuck with lower yields later. This drives mortgage rates down, as investors are clamoring to buy before yields get too low.