3 THINGS TO KNOW... What could drive mortgage rates up? & What is keeping mortgage rates low?
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3 Things to Know...
What could drive mortgage rates up?
& What is keeping mortgage rates low?
(episode 59)
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What could drive mortgage rates up?
1) An improving economy
— The better the U.S. economy performs for jobs, consumer spending, and overall growth, the higher interest rates should go.
2) Inflation
— Inflation almost always leads to higher mortgage rates, and inflation rates in 2021 have far exceeded expectations. (Although the Federal Reserve still maintains current inflation rates should be temporary)
3) Real estate demand
— Despite low inventory, demand for new homes and existing homes remains incredibly strong. Normally, a surge in mortgage financing should lead to higher rates.
*What’s keeping mortgage rates low? *
1) The Delta variant
— Fear that the coronavirus Delta variant could stall economic growth at home and abroad is pushing mortgage rates down. Remember that weaker economies lead to lower mortgage rates.
2) Easy money policies by the Federal Reserve
— By keeping its benchmark interest rate (the Federal Funds Rate) near 0% and continuing to purchase billions of dollars worth of mortgage-backed securities (MBS), the Fed is keeping mortgage rates artificially low .
3) Foreign investment in U.S. debt
— Foreign investors continue to purchase relatively safe U.S. investments, including things like 10-Year Treasury bonds and MBS. An influx of dollars from these investors means continued low interest rates for borrowers
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