Over the past few days, I’ve had more than a few people ask me about what’s happening to mortgage rates with all the major geo-political, economic, and Fed news floating around. So, I thought I’d break it all down for you and hopefully answer your questions and set you up for success if you are considering buying or refinancing a home in the near future.
Q: We hear about the Fed changing interest rates. How does that affect mortgage rates?
A: Put simply, the Fed does not set mortgage rates, banks that lend money for mortgages set their own rates. When the Fed raises or lowers “rates” it’s only the “Fed Funds Rate,” which has nothing to do with mortgages. However, when the Fed changes its rate, it signals to the broader market (and banks) that they may want to reassess rates. And depending on many other factors, like what’s happening with US/China trade talks, the Jobs Report, the health of the European economy, the market will move and rates change.
Q: So, what’s happening with mortgage rates right now? What should I do to make the most of it?
A: The overall trend for rates right now is that we’re seeing rates lower then they’ve been in three years. As you know, rates fluctuate daily and currently we’re seeing some more ups and downs due to uncertainty over the Fed, China/US trade talks, and mixed economic data. However, we’re now in a low rate environment that works greatly in favor of home buyers, investors, and mortgage borrowers that got their mortgage in the last two years. If you are in any of those camps, now is definitely the time to buy or refinance a home. Get in touch and I’m happy to discuss your specific scenario.
Q: What should I keep an eye on to know the trend for mortgage rates?
A: Friends often ask what they can do to keep up on what rates are doing and I suggest two things to watch. 1.) Each week Freddie Mac publishes a weekly survey of average mortgage rates. There’s a link on our website to the short report and I post it weekly on social media. 2.) I also like to keep an eye on the direction of the 10-year Treasury yield. I know, sounds technical but mortgage rates often follow its trend. Be sure you’re watching the “yield” and not the price of the bonds, the move in opposite directions.
My hope is that this was helpful to you. Bottom line is that rates often follow the direction of the health of the economy. When all is going well, rates rise too. However, when markets believe a recession is on the horizon, and during a recession (which happen regularly, by the way) rates tend to go lower. What’s great about the current environment is that rates are low even as housing appreciation and job growth are healthy. So, my advice now is to take advantage of it if you can!
What are your questions that I didn’t answer here? Let me know and I’m happy to get them answered.