Interest Rates are in the News Again

Filed under: Market Comentary

When the topic of interest rates hit the news channels, it’s common for everyone working in the real estate business to get many questions about this topic. Most of the calls I’ve received over the past few days are from clients who are in the process of buying a home or shopping around to find the best options for a mortgage or refinance. Today, I’m sharing the real story to show you how most of the news outlets actually have it at least partially wrong.

Shedding Light on Current Interest Rate Trends

It is important to remember that the interest rates discussed in the media are rarely about mortgage-backed securities. Usually, news stories are referring to the treasury notes, which do not have a direct impact on mortgage rates. Lately, the new stories have been discussing the inverting of the treasury note yield curve, and they keep talking about how this trend is a good predictor that a recession is coming.

Here’s what you need to pay attention to: there is an inversion between the 10-year and the 3-month treasuries. So, in the current market, you are getting a better return with the shorter-term than you are for the longer-term treasuries. The news outlets are using this indicator to assume that a recession is coming.

But this trend is not the predictor of a recession. If the 2-year and the 10-year invert, then it’s a predictor of a potential recession. It’s interesting to see the media reacting to the current trend when it’s not actually tied to an upcoming recession. They are looking at the wrong two treasuries!

What Does it Mean for You?

If you are in the market looking for a house, then know that we are seeing much more action in the treasuries than we see in the mortgage-backed securities or mortgage interest rates. We’re currently close to our 1-year lows for mortgage rates, which is the real factor you need to be paying attention to.

Any time these topics are in the news, I like to share information so that you understand what is really happening in the industry. Don’t hesitate to call me any time if you have questions about your options for finding the best mortgage solutions for your new home.

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