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Feature Article:Why mortgage rates are still falling

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If you think back six months ago, you should be able to remember what it was like heading into the Federal Reserve meeting that everyone was waiting for. It was the December meeting that the Fed made known would be the one that put an end to the ultra-low interest rates. Rates actually ticked up in anticipation of th meeting, then went flat. Now, there actually down further. So what gives?

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Why Mortgage Rates Are Still Falling

Maybe I’ve written too many times already about why mortgage rates haven’t risen in the wake of the Federal Reserve’s December meeting, at which the federal funds rate was finally raised from zero. It’s been explained before why long-term rates, including those attached to mortgages, didn’t spike.

Most people paying attention would tell you that it would be a gradual rise, not a spike at all. You probably heard that it’d be the last quarter of the year, maybe, before consumer rates bore a discernible reflection of the Fed’s increase. But what perhaps no one fully expected has actually come to pass:

Already-flat rates actually went lower. They’ve ticked up slightly in recent days but have been mostly in a downward trend since January.

At the time the Fed announced its hike – the interest rate at which banks are charged to borrow money – mortgage rates were just shy of 4 percent for a 30-year, fixed-rate mortgage. That rate as I write this is at 3.44 percent and last week was even lower, near three-year lows, in fact. This was probably unexpected by most.

So why have rates actually fallen – and mostly continue to trend that way – after the Fed’s move? There are a few things that would explain it. The simplest way would be a reminder that the Federal Reserve does not directly control mortgage rates. Sure, it can manipulate what banks are charged to borrow the money they pass on to consumer borrowers, but ultimately it’s those banks that decide what to charge those consumers. And just like in any other business that must set prices, the market often dictates where those prices land. And the market right now is saying enough to keep prices low.

One of the more interesting things lately has been Treasury yields that haven’t as directly influenced mortgage rates as you might expect. Treasury notes, bills and bonds, you might remember, are the alternative to mortgage securities in terms of fixed-income investments. So when T-Bills – the safest of these investments because of government guarantees – rise, banks typically bump rates up.

However, when mortgage rates recently dipped to their near three-year low, it coincided with a rise in Treasury yields. In fact, when Treasury bond yields rose by three basis points, mortgage rates actually dipped a bit in the same week. “Weird,” an observer might say to himself or herself about that. But “weird” isn’t an explanation.

So what is the explanation? Well, I’m no economist or econ professor, but the bottom line is that banks were all but given the green light to charge higher rates but didn’t, which means they know something or think they know something. That something, it would certainly appear, is the shape of the overall economy.

The stock market, as you are probably aware, has recovered from a fairly good slump. Typically, when stocks are robust, interest rates are not. Risk-friendlier times for investors tend not to favor the lower-risk, lower-reward investments, such as mortgage securities.

But the story of this real estate recovery and how it fits into the overall economy isn’t as much about the investor as it is about the American consumer. It’s no secret that household incomes are not rising with inflation; if anything, they’re falling. And housing prices continue to rise, very rapidly in many markets.

Which means, basically, that if banks don’t want to see the purchase end of their mortgage business dry up, they need to do their part to keep home purchases affordable. That means lower rates. It’s also probably not a coincidence that the latest drop in rates coincided with a long-overdue rise in fuel prices. As I said, the eye is very much on the average consumer and his or her expenses.

Unfortunately, what it also tells us is that despite the occasional spurts, the country’s overall economic growth is still pretty weak. Job numbers aren’t as great as you might expect (or as some would have you believe), and there is enough concern over economic benchmarks like that to make lenders wary of higher rates.

It feels like one of those “wait and see” times in the economy – like things could start humming along better or start slowing down. And banks, like others, are waiting and seeing before raising mortgage rates.

And that wait-and-see period has been going on for longer than expected, which is why rates are quicker to fall than rise.

Features that Sell Your Home Faster

If you’re a homeowner, there’s probably a list of house projects you want or need to do. When the list is long but money is short, it’s sometimes difficult to prioritize those projects in a budget-friendly way. Zillow, however, recently applied data analytics to the problem and, as this Business Insider article points out, came up with the features that appeal to the most buyers and can help sell a home faster.

10-Point Checklist for Buying a Home

If it’s your first time, you want to make sure you know what to do and expect. If you’ve done it before, it’s still never a bad idea to brush up on things. We’re talking about buying a house, and though it can be quite a process, it’s quite painless if you’re ready for it. So here’s a decent post from the Motley Fool blog with a 10-point checklist to follow when you buy a home.

Why Your Brain Loves Procrastination

There are probably a million things that you’re not doing right now, even though you said you’d do it later, and it’s later. You’re not alone in your procrastinating ways. In fact, it’s estimated that around 5 percent of the population are chronic procrastinators to the point it affects their daily lives. But, as this Vox article points out, it’s not always laziness. Your brain is wired to love procrastination.

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