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The Fed raises interest rates, so why are interest rates falling?

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The Fed raised interest rates, so why are mortgage rates falling?

Apr 18, 2017

The Federal Reserve raised its benchmark interest rate last month, but instead of rising, mortgage rates have dropped.

The reason, according to CNN Money? A combination of global uncertainty and increasing skepticism regarding President Donald Trump's ability to implement his tax cuts and infrastructure spending proposals.

Conventional wisdom suggested mortgage rates would trend upward after the Fed raised the overnight funds rate by 0.25 percent.

Instead, they have dropped steadily, reaching an average of 4.08 percent last week.

CNN Money says that's because of declining yields in 10-year Treasury notes. Mortgage rates tend to track the bonds, considered one of the safest of safe investments.

"The 10-year Treasury note jumped after November 8 on Trump's promises of tax reform and infrastructure spending. Higher yields make borrowing more expensive," the site says.

"But recent global uncertainty and signs that the White House might not be as productive with its agenda as thought has caused yields to fall more recently."

As CNN Money notes, "House hunters should welcome the drop in rates with open arms as they head into the busy buying season."

By Tim Stuhldreher

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