Why are interest rates rising despite Fed rate cuts? Everybody thought when the Fed cut interest rate it would translate to lower mortgage costs. We’ll explain why it’s not happening, and we’ve been warning you for months about this.
30-year mortgage interest rates are more closely tied to the 10-year treasury note than anything else. The 10-year treasury note is forward of the Federal Reserve, meaning the note reacts faster than the Fed. The markets are telling us rates should not come down yet.
Interest Rates Rising Despite Fed Rate Cuts
The bond market does not like two things, and the government controls both. The first is deficit spending. The markets are telling us we cannot continue to spend like this. The bids coming in from the auctions are at higher rates because with more deficit spending there is more risk of nonpayment in the future. Additionally, there is no plan to balance the budget, let alone pay off the $35 trillion dollar debt today. This year alone we are racking up $2 trillion dollar debt. The US government will not be able to pay its debts in the future if nothing changes. It does not matter what rate the Fed states, the markets have to purchase the debt. The markets are speaking.
The second thing the markets do not like is inflation. Inflation occurs when there is too much money chasing too few goods and services. This is exactly what the government created by spending trillions of dollars. Real wages are declining, which means the pay raises people experienced couldn’t keep up with the higher inflation costs. People lose money on the deal.
Higher Borrowing Costs
If inflation isn’t bad enough, consumers are also hit with higher borrowing costs. Not only does that new home cost more to build, it also costs more to finance. It’s a double whammy, and our government did this to us.
We the people are just as guilty because who doesn’t like free money flowing into the economy? The only problem is, there is a price to pay down the road, and we are paying the price today. Politicians are afraid to tell us the truth or we’ll vote them out of office.
The government does not create jobs or wealth. The government simply borrows on our behalf, because they can and adds it to our tab. Then one day the financial markets speak up and say we need to see a plan, or we’re not going to keep loaning you money. At least not at today’s rates.
Related Data
I will post some related articles on our Blog that explain further how the markets view our debt, and why rates are rising. They’re too long to post here. Our Blog is located at https://blog.topagent.com It’s a great resource filled with every article we’ve written for the paper for the last 19 years. It’s interesting to go back to certain dates in time and see what the real estate news of the day was. People often ask me how the market was when they bought. This Blog has your answers, sorted by date.
10-, 30-year Treasury yields end at highest since July as deficit worries grow
Worries about deficit spending after election bog down U.S. government debt
Bond-market selloff leaves 10-, 30-year yields at almost 3-month closing highs
Buying or Selling
If you’re thinking of buying or selling, Always Call the Ellis Team at Keller Williams Realty 239-310-6500. You can search the MLS like a pro at www.LeeCountyOnline.com or find your home value at www.SWFLhomevalues.com
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Good luck, and Happy Selling!
