Why Mortgage Rates are Rising as the Fed Keeps Cutting
Summary
Mortgage rates are unexpectedly increasing despite the Federal Reserve cutting rates, primarily due to concerns about inflation and the labor market. Hosts should understand that economic factors influencing the bond market, and subsequently mortgage rates, impact housing affordability and potentially the housing market.
Key Insights
- •The Federal Reserve cut rates by 25 basis points (0.25%), but mortgage rates went up due to uncertainty in the market stemming from what the Federal Reserve chairman said.
- •The bond market is reactive to recession risks, causing bond investors to invest in bonds, which influences mortgage rates.
- •We are at a 4.2% unemployment rate and inflation is at 3.1%, but it could shift into a stagflationary environment.
Action Items
- ✓Monitor economic indicators (inflation and labor market data) to understand how the bond market and mortgage rates might move, which can impact housing affordability.Effort: lowImpact: medium
Common Mistakes
- ⚠Relying solely on Federal Reserve rate cuts to predict mortgage rate trends as Powell's statements can cause uncertainty in the market.
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