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The housing market in 2024 has slowed down, largely due to rising interest rates. Many potential buyers are struggling to enter the market because the higher rates make their mortgage payments too expensive.
Even for those who do venture into the market, the situation has been volatile. One of Jill Comfort’s clients saw her mortgage payment increase significantly after the Federal Reserve announced rate cuts, which were later reversed.
Mortgages are not directly linked to bank rates but rather to 10-year Treasury notes. Investors’ expectations for inflation and economic growth influence the yields on these notes.
Currently, mortgage rates are higher than bond yields because mortgages are considered riskier investments. Homeowners can default, and they can also refinance their mortgages at any time.
Despite rate cuts by the Federal Reserve, mortgage rates continue to rise due to concerns about persistent inflation and economic growth. Investors are also worried about potential prepayment risk for mortgages.
The uncertainty in the economy is making it difficult to predict the future of mortgage rates. However, experts believe that they will remain elevated in the near term.