Michael Seward's Blog
When the Federal Reserve raises interest rates, that doesn't refer to mortgage rates. Mortgage rates are tied to bonds yields, and, more specifically, U.S. Treasury bond yields.
As the New York Times recently put it: "Higher government bond yields can make it more expensive for individuals, companies and governments to borrow money. They serve, for example, as the foundation for the interest rates that banks charge on fixed-rate mortgages."
CNBC put it this way: "The 10-year Treasury is the one to watch, and while many strategists targeted rates under 3 percent for this year, they acknowledge the risk is to the upside with yields potentially climbing to 3.25 percent. The 10-year is the benchmark best known to investors, and its yield influences a whole range of loans, including home mortgages."
The stock market has been in what has been characterized as a correction since Friday, February 2. Investors have reportedly been concerned about the impact of good economic news, like wage and job growth. It has been reported that the good news along with the impacts of the recent tax overhaul has caused fears that central banks will raise interest rates faster to fight off inflation. Financial professionals have reportedly been expecting a stock market correction, as there has been steady growth without much volatility in recent months.
Higher government bond yields have reportedly been tied to higher government spending and news that the Bank of England may raise interest rates sooner than expected due to strong global economic growth.
The volatility in the stock market could lead to another challenge for home buyers: institutional investors looking to change their portfolio to real estate investment, Daren Blomquist, senior vice president of real-estate analytics firm Attom Data Solutions told Marketwatch.
That would create more competition in a real estate market already plagued by low inventory.
Call Michael Seward Real Estate at 413-531-7129 to buy or sell a home.
Michael Seward is a Massachusetts licensed real estate broker and member of the REALTOR® Association of Pioneer Valley, Massachusetts Association of REALTORS®, and the National Association of REALTORS®. He is also a Certified Residential Specialist, Certified GREEN, Certified Buyers Representative, Certified New Homes Specialist, and Loss Mitigation Specialist. He has been a REALTOR® since 2003.