Get free access to our world class MLS search tools, save your favorite listings, create saved searches & much more!

The Fed raised interest rates. Why are mortgages getting cheaper?

Posted by Mastura Zaini-Roberts on Wednesday, April 19th, 2017 at 9:27am.

Looks like the homebuying frenzy isn't going anywhere, at least for now.

  @KathrynVaselApril 14, 2017: 11:51 AM ET

After the Federal Reserve raised its key interest rate nearly a month ago, many people expected mortgages rates to creep up. But instead, they've been on the decline ever since.

The average rate of a 30-year fixed mortgage fell to 4.08% this week, the fourth consecutive week of declines, and the lowest level this year, Freddie Mac reported Thursday morning.

A higher Federal Funds rate makes it more expensive for banks to borrow money, which can translate into higher borrowing rates for consumers.

But home mortgage rates tend to move more in line with the 10-year Treasury note, issued by the U.S. government and viewed as one of the safest investments in the world. They are widely traded, and lately investors have been gobbling them up. More demand sends the interest rate, or the yield, lower.

"We've seen a reversal of the 'Trump Trade' which began on election night that consisted of a broad rise in stock prices and bond yields moving up," explained Mark Hamrick, senior economic analyst at Bankrate.

The 10-year Treasury note jumped after November 8 on Trump's promises of tax reform and infrastructure spending. Higher yields make borrowing more expensive.

But recent global uncertainty and signs that the White House might not be as productive with its agenda as thought has caused yields to fall more recently.

"It was predicated on a bet the administration would accomplish all its goals in short order, and as we've seen, the reality is it's a lot more challenging," said Hamrick.

The 10-year Treasury yield is around 2.23%, down from around 2.62% nearly a month ago. Mortgage rates have moved lower in tandem.

Overseas uncertainty has also put pressure on yields. "The bond market tends to do well during times of international conflict and now you see that occurring on two fronts at the moment," said Hamrick.

While mortgage rates are higher than they were a year ago, they are still relatively low.

"We will probably see rates higher at the end of year, around 4.5%," said Len Kiefer, deputy chief economist for Freddie Mac.

House hunters should welcome the drop in rates with open arms as they head into the busy buying season. Many markets throughout the country are facing inventory shortages, which has pushed prices higher.

"We know that with every move higher with mortgage rates it adds to the cost, but that is only going to limit purchases on the margin," said Hamrick.

Mastura Roberts
(702) 919-5400
offers@greatlasvegashomes.com

Team Leader, The Tonnesen Team
Berkshire Hathaway HomeServices, Nevada
3185 St Rose Pkwy #100 Henderson, NV 89052

With over 30 years of experience helping families call Las Vegas "home!"



Related Blog Posts

Just Sold Las Vegas Real Estate – 6862 Apogee Ridge Court Las Vegas, Nevada 89135

Twenty years ago the Ray family had an incredible opportunity to leave Las Vegas and move to Southern California. But, after nearly two decades away, the pull of aging parents, children and even grandchildren grew strong enough for the Rays to reconsider a move back. So here was their new challenge, how do you come ba...

The Tonnesen Team is sponsoring a great upcoming charity event that will benefit children’s cancer

The Tonnesen Team is sponsoring a great upcoming charity event that will benefit children’s cancer.  Kicking Cancer will be this Sunday, October 23rd beginning at 3pm.  It will be a fun game of FootGolf, which is soccer on the golf course.  There will be raffle prizes and food as well. ...

What’s driving real estate’s home listing shortage?

There's a definite lack of housing inventory, and part of it can be attributed to sellers staying put Key Takeaways Most sellers are also hoping to buy, so they are facing the same market constraints as buyers. Housing supply has not kept up with demand because building has become increasin...

Home-price gains continue strong in January 2017 – report

by Anna Sobrevinas   29 Mar 2017 January marked 31 months of home price gains as it saw a 5.9% annual gain, compared with a 5.7% annual gain the month before, according to new data from S&P CoreLogic Case-Shiller. Year-over-year, the index’s 10-city Composite saw a 5.1% annual increa...

What does a real estate agent do all day anyway?

It's not as easy as it looks on TV Key Takeaways: A real estate agent's job is to make sure everyone else involved in the transaction is doing their job. Agents have to continually shift gears to quickly adapt and respond to customer needs. What does a real estate agent do? Oh, where t...

Leave a Comment

Have a Question?

Contact Us

Follow Us