00:00What influences mortgage rates? The first concept to understand is U.S. Treasury bond yields.
00:06Mortgage rates are largely influenced by these bonds rather than Federal Reserve rates. Treasury
00:11bond yields is the interest rate that the U.S. government pays to borrow money for 10 years,
00:17and what is happening to treasury bonds matters because it influences borrowing costs. Treasury
00:22yields often reflect what investors in the financial markets anticipate for economic growth,
00:28inflation, and monetary policy. As you can see from this graph, the average 30-year fixed mortgage
00:33rate and the 10-year treasury bond yield move closely in sync. When the bond yield increases,
00:40mortgage rates usually go up as well, and over the last three years we've seen an upward trend in both.
00:45So while the Federal Reserve cut rates in 2024, treasury bond yields have gone up to almost 5%,
00:51and this is the highest they've been since just before the financial crisis in 2008. This is bad
00:57news for the U.S. government as it means they must pay more to service their debts, and it's also bad
01:02news for borrowers, including mortgage holders, as mortgage interest rates greatly depend on which
01:08way bond yields are moving. For example, in December 2024, the 30-year fixed mortgage rate jumped to 6.72%
01:16compared to 6.6% just a week earlier. The rise was tied to changes in the bond market driven by higher
01:23inflation expectations and growing uncertainty in the economy. There are several factors that have
01:28contributed to the recent volatility that we've seen in the bond market. The first is that there
01:33have been concerns about inflation and government economic policies. The U.S. annual inflation rate
01:39is currently at 2.7%. Although it's moving in the right direction, it's still above the Federal
01:44Reserve's target of 2%, and many investors worry that it will be difficult to bring it fully under control.
01:50There's also uncertainty about the new Trump administration and what government policies
01:55could be introduced, such as policies to boost economic growth and tariffs, which could push the
02:01inflation rate further upwards and lead to higher interest rates. At the same time, rising U.S. federal
02:06debts and growing budget deficits has made investors increasingly cautious, which has put upward pressure
02:13on bond yields. The second point is that bond yields rise to attract investors. Treasury bonds are seen
02:19as a safe investment as they're guaranteed by the U.S. government, but investors tend to turn to higher
02:25return investment opportunities such as stocks and shares when the financial markets are growing.
02:30The return on the S&P 500 stock market index was around 24% in 2023. During that time, the average
02:38yield on a 10-year Treasury bond was less than 4%. It doesn't take an expert investor to work out which gave you
02:45a better return for your money. As demand declines for 10-year Treasury bonds, the bond yield rates rise to attract investors.
02:53잠 Afio Chase Bank, as the Window of Rightsます the locality of amphiburger
02:56calculated. If you are interested in this building, they'll going to manage it with whom these
02:58급ers open to end and that perfume are added, whether you don wow the luxury com
03:00that belongs to small Hoş.
03:01Be a better return.
03:02The S&P 505
03:03has...
03:04...
03:04...
03:05...
03:06...
03:06...
03:06...
03:08...
03:09...
03:10...
03:11...
03:11Bill
03:13...
03:15Ist
03:15...
03:17...
Comments