Wednesday, November 20, 2024
Home mortgage rates keep climbing despite soaring stock prices and rate cuts by The Fed.
Urban Living
Posted By Babs De Lay on November 20, 2024, 4:00 AM
Strange things are happening in the financial world and many folks are either not paying attention or confused as to what's going on with mortgage interest rates and the economy. Here's my take on this, based on what my clients have been asking of me for the last month or so.
First, the Federal Reserve has lowered interest rates during its last two meetings. The Central Bank of the United States ("The Fed") manages the supply of money by helping to control inflation through interest rates that can make borrowing money cheaper. This can stimulate job growth and encourage investment.
The Fed doesn't actually make and print money—that's up to the Treasury Department. Generally, when the Fed lowers its interest rate to banks, the cut trickles down to borrowers in the form of lower credit card and mortgage interest rates. However, mortgage/home loan rates did not go down with the last two rate cuts ... they went up! WTF?
Second, mortgage rates from a few months ago were in the low 6% range and are now at 7% or slightly higher. This keeps many buyers—especially first timers—out of the market, and a helluva lot of people are not making loan applications as they wait for a break in rates. When news came that Donald Trump won the election, the stock market went nuts and soared by 1,500 points, making many investors very happy while their portfolios grew overnight.
Big business loves Trump's policies. Investor's Business Daily reported that 13 specific stocks made investors more than $1 trillion after the election results came in. Bitcoin and cryptocurrency-related stocks also soared. It's interesting that Trump and his sons launched a crypto business this fall and he intends to make the U.S. the "crypto capital of the planet." His Trump Media also soared in value and his fortunes only benefited from the outcome of the election.
But as stocks went up, the bond market got slammed. This is a different marketplace where investors trade securities like bonds, bills and notes—not stocks. As interest rates go up, the value of these investments go down and mortgage rates go up. With lower bond yields, investors switch to higher-yield investments.
Mortgage lenders tie their interest rates to Treasury bonds. So if you're watching financial news and thinking of starting/refinancing a mortgage, pay attention to what's happening in the bond market. Yes, mortgage rates are higher now, but certainly not like when I became a realtor in 1984, when rates were 18% to 20% on a home mortgage! Your lender does have options to get you lower-rate mortgages called "buy downs," where you pay money upfront to buy down the interest—say, from 7.25% to 6.25% or even to 5.25% (rates change daily).
About The Author
Babs De Lay
A full-time broker/owner of Urban Utah Homes and Estates, Babs De Lay serves on the Salt Lake City Historic Landmark Commission. A writer and golfer, you'll find them working as a staff guardian at the Temple at Burning Man each year.
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