If you’re in the market to buy a home this 2024, mortgage rates have likely been on your radar with all the buzz and chatter throughout the media. In recent years, mortgage rates have gradually reached historic lows, saw significant spikes, and are currently experiencing a slight dip in their rates. But have you ever just wondered and asked yourself about the reasons behind all these fluctuations? Well, the explanation is multifaceted, as numerous factors exert influence on mortgage rates. Let’s delve into some key factors affecting mortgage rates in San Diego, shall we?
Inflation and the Federal Reserve play significant roles in influencing Mortgage Rates
While the Federal Reserve (often referred to as the Fed) doesn’t directly set mortgage rates, it does take action based on factors like inflation, the state of the economy, and employment rates. When the Fed makes adjustments to the Federal Funds Rate in response to these factors, it typically has a ripple effect on mortgage rates as well. This ebb and flow relationship is well explained by Business Insider:
“The Federal Reserve slows inflation by raising the federal funds rate, which can indirectly impact mortgages. High inflation and investor expectations of more Fed rate hikes can push mortgage rates up. If investors believe the Fed may cut rates and inflation is decelerating, mortgage rates will typically trend down.”
In recent years, the Federal Reserve has taken steps to combat inflation by increasing the Federal Fund Rate to balance things out accordingly. As a result, mortgage rates gradually also saw an upward trend. However, there’s good news on the horizon. Experts are now anticipating a positive shift in both inflation and mortgage rates throughout the coming year. According to Danielle Hale, Chief Economist at Realtor.com, the outlook does look promising.
“[M]ortgage rates will continue to ease in 2024 as inflation improves . . .”
Some discussions and buzz also have emerged regarding the possibility of the Federal Reserve reducing the Fed Funds Rate within this year. This consideration stems from the observation that inflation is currently showing signs of cooling, even though it hasn’t quite reached the Fed’s preferred target just yet. Such a move by the Federal Reserve would reflect their proactive stance in managing economic dynamics.
The 10-Year Treasury Yield
Aside from Inflation and the Federal Reserve, mortgage companies closely monitor the 10-Year Treasury Yield as a crucial factor in determining interest rates for their home loans. When the 10-Year Treasury Yield rises, mortgage rates tend to follow suit, moving upwards. Conversely, when the yield decreases, mortgage rates typically lower as well. Investopedia provides valuable insights into this dynamic relationship.
“One frequently used government bond benchmark to which mortgage lenders often peg their interest rates is the 10-year Treasury bond yield.”
In the past, the relationship between the 10-Year Treasury Yield and the 30-year fixed mortgage rate exhibited a relatively stable pattern. However, recent trends have disrupted this historical consistency. This deviation suggests that there is potential for mortgage rates to decrease in the near future. Therefore, closely monitoring the direction in which the treasury yield is moving can provide valuable insights for experts, helping them anticipate the potential trajectory of mortgage rates.
Conclusion on The Key Factors Affecting Mortgage Rates
In the coming weeks, as the Federal Reserve holds its scheduled meeting, industry experts will closely monitor their decisions and assess their potential impact on the broader economy. To effectively navigate any fluctuations in mortgage rates and how they might affect your plans to move this 2024, having a dedicated team of real estate professionals like the McT Real Estate Group team in your corner is essential. We are a team that can definitely provide you with expert guidance and ensure you make informed decisions in response to any changes that may arise from the Fed’s meeting.