Two Key Factors Influencing Mortgage Rates

As a potential homebuyer, monitoring mortgage rates is likely a priority for you. Recently, these rates have seen significant fluctuations – from historic lows to dramatic increases, and now a slight decrease. But what drives these changes?

The factors influencing mortgage rates are diverse and complex. Let’s explore a couple of the most significant ones.

Inflation and the Role of the Federal Reserve

Although the Federal Reserve (commonly known as the Fed) does not set mortgage rates directly, its actions significantly influence them. The Fed adjusts the Federal Funds Rate in response to inflation, economic conditions, and employment rates, among other factors. These adjustments often impact mortgage rates. As Business Insider outlines:

“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 Fed has increased the Federal Fund Rate to counter inflation, which has correspondingly led to a rise in mortgage rates. However, experts like Danielle Hale, Chief Economist at Realtor.com, predict a more favorable outlook for both inflation and mortgage rates in 2024:

“[M]ortgage rates will continue to ease in 2024 as inflation improves . . .”

Discussions are also ongoing about a potential reduction in the Fed Funds Rate this year if inflation continues to decline, although it hasn’t yet reached the Fed’s ideal target.

The 10-Year Treasury Yield and Mortgage Rates

Mortgage lenders often use the 10-Year Treasury Yield as a benchmark for setting interest rates on home loans. An increase in the yield typically leads to higher mortgage rates, and vice versa. Investopedia explains this correlation:

“One frequently used government bond benchmark to which mortgage lenders often peg their interest rates is the 10-year Treasury bond yield.”

While the gap between the 10-Year Treasury Yield and the 30-year fixed mortgage rate has traditionally been consistent, recent times have seen variations, indicating potential for mortgage rates to decrease. Monitoring the treasury yield trends can provide insights into future mortgage rate movements.

Bottom Line

With the upcoming Federal Reserve meeting, industry experts are poised to observe the decisions made and their subsequent effects on the economy. For those planning to move, it’s wise to have a team of professionals, like the ones at Countryside Homes NJ and RE/MAX Select, to guide you. Reach out to our trusted lending partners Mark Scocco with Crown Home Mortgage and Bruce Oliver with Bond Street Mortgage to discuss any changes in mortgage rates and how those changes may impact your buying power.

Client Testimonials for Countryside Homes NJ

At Countryside Homes NJ and RE/MAX Select, we pride ourselves on delivering exceptional service to our clients. But don’t just take our word for it—read what our satisfied customers have to say. From first-time homebuyers to seasoned real estate investors and new home builders, our clients appreciate our dedication, expertise, and commitment to their success. Here are some of their stories.

David R. New Homeowner

Collaborating with Keith LaBrunda and Heather Montalbano from Countryside Homes NJ and RE/MAX Select streamlined the home-buying process for me. They were attentive to my needs and preferences, ensuring they understood exactly what I was seeking in a home and what was within my financial comfort zone. Keith and Heather provided invaluable assistance during the offer stage, sharing insightful details that enabled me to place a successful bid on my desired property. They recommended associates to assist me with securing a mortgage, conducting home inspections, and acquiring homeowner's insurance. Post-purchase, they continued to be a resource, suggesting local companies to contact for internet, water, waste management, oil, and other essential services. The experience of purchasing a home with Keith LaBrunda and Heather Montalbano was seamless and enjoyable.

Rachel and Andre First Time Homebuyer

As first-time homebuyers, the process of finding and purchasing a home felt daunting. But from the moment we reached out to Heather and Keith at Countryside Homes NJ and RE/MAX Select, our worries were put to rest. Their team was incredibly patient, answering all our questions and guiding us through every step. They took the time to understand our needs and preferences, ensuring that we found the perfect home in a neighborhood we love. We were especially impressed by their vast knowledge of the local market and their commitment to ensuring we got the best deal possible. We can't thank them enough for making our dream of homeownership a reality. If you're in the market for a new home, we highly recommend Heather and Keith at Countryside Homes NJ and RE/MAX Select. They truly go above and beyond for their clients!

Prestia Family New Homeowners

From the moment we began our home search, Heather at Countryside Homes NJ and RE/MAX Select stood out as the epitome of professionalism and dedication. Her team's in-depth knowledge of the Rockaway Borough area and their unwavering commitment to our needs made our home buying journey not only smooth but truly enjoyable. As new homeowners in Rockaway Borough, NJ, we can confidently say that choosing Heather at Countryside Homes NJ and RE/MAX Select was the best decision we made. Her expertise, patience, and genuine care for our family's needs transformed what could have been a stressful process into a memorable and joyous occasion. We are beyond grateful for her support and would highly recommend her and her team to anyone looking to find their dream home. Thank you for turning our dreams into reality!