The REAL Reason Mortgage Rates Are Rising
Published: 2024-05-04
Status:
Available
|
Analyzed
Published: 2024-05-04
Status:
Available
|
Analyzed
Predictions from this Video
Incorrect: 0
Prediction
Topic
Status
Home builders are spending 5-6% of the home price to reduce mortgage rates by 1-2% for buyers.
"Builders are contributing 5 to 6% of the home purchase price UPF front to lower the 30-year mortgage rate by 1 to 2%."
Pending
Mortgage rates are expected to continue rising, potentially moving from 7% towards 8%.
"mortgage rates are rising again we've recently seen mortgage rates past the 7% Mark and now they're creeping back towards 8%"
Pending
The Federal Reserve has not started cutting interest rates due to persistent inflation.
"because inflation is still hot they have not begun cutting interest rates."
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An increase in mortgage rates from 6.5% to 7.5% on a $400,000 loan would increase monthly payments by approximately $269.
"if you're going to borrow this $400,000 at 6.5% that means your monthly mortgage payments are going to be $2,528 a month... but if you borrow that same $400,000 at 7.5 % instead of 6.2% now it's going to cost you $2,797 a month"
Pending
The Federal Reserve has maintained interest rates without cuts or hikes for approximately one year.
"as of today the Federal Reserve Bank has not begun cutting interest rates and they haven't risen interest rates for a while either so now even though the Federal Reserve Bank hasn't cut or risen interest rates they kind of kept interest rates the same for almost a year now"
Pending
Home builders are offering mortgage buy-downs as an incentive for new construction home purchases, where they cover a portion of the buyer's mortgage interest.
"the way a mortgage buy down works is it's generally a new construction home where a home seller the developer here will say sure you want to buy a half a million dollar home great we will sell you this half a million dollar home and in addition to that what we will do to incentivize you to buy our home is we will pay to buy down your mortgage"
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Treasury yields are increasing due to investor concerns about the economy and inflation.
"what we've been seeing happen especially recently is that treasury yields have been rising and the reason why treasure yields have been rising is because people are concerned about the economy and inflation"
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There are two main types of mortgage buy-downs being offered: temporary and permanent.
"one are temporary mortgage buy downs and the other are permanent mortgage buy Downs"
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In 2024, treasury yields have risen as investors demand higher returns.
"investors will then want a higher return and that's why recently in 2024 we've been seeing treasury yields go up because investors have been demanding higher returns"
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A temporary mortgage buy-down example shows initial interest rates of 4.5% in year 1, 5.5% in year 2, and 6.5% in year 3, before reverting to the market rate of 7.5% in year 4.
"the way a mortgage buy down works is let's assume right now that the market rate for a 30-year mortgage is 7 1.5% but the first year of your mortgage instead of 7 1/2% you pay 4 1/2% year 2 you pay 5 1/2% year three you pay 6 1/2% and then you're four you pay 7 1.2%"
Pending
Rising treasury yields will lead to an increase in mortgage rates.
"if treasury yields are going up your mortgage rates also going to go up"
Pending
A permanent mortgage buy-down from a builder could lower a 7.5% market rate mortgage to 6% for the life of the loan.
"a permanent mortgage buy down says that if you want to get a 30-year fixed rate mortgage it's 7 1.2% but because you're going to buy this home from me this Builder I'm going to work to pay down your mortgage from 75% to now 6%"
Pending
When buying a home, ensure affordability by covering the down payment, monthly payments, and moving costs.
"if you want to go out and buy a home that's fine just make sure you can afford it and when I say afford it that means you got to afford three things number one I want you to afford the down payment number two I want you to afford the m payment and number three I want you to afford the moving costs"
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A minimum of 20% down payment is recommended for purchasing a home.
"what I like to see is at a minimum 20% down"
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Builders are estimated to be paying 5-6% of the home price to reduce mortgage rates by 1-2%.
"Builders are contributing 5 to 6% of the home purchase price UPF front to lower the 30-year mortgage rate by 1 to 2%"
Pending
For a $500,000 home, a builder might spend $30,000 of their profit to reduce a 7.5% mortgage to 6.5%.
"if you're buying this $500,000 home new construction from a builder they might pay $30,000 out of their own profits to buy down their mortgage from 7 1.2% to 62%"
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Monthly housing costs should not exceed 25% of take-home pay.
"I don't want my monthly cost to be more than 25% of my take-home pay"
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The possibility of future interest rate hikes, rather than cuts, should be seriously considered.
"you have to take seriously the possibility that the next interest rate move will be upwards rather than downwards"
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Home builders aim to maintain and inflate home prices to maximize sales revenue and facilitate future refinancing at higher valuations.
"Builders who are building these new construction homes want to keep up home prices they want to inflate home prices as much as possible because that means they're going to be able to sell their homes for top dollar and that means they're also going to be able to refinance and pull cash out if they need to at top dollar"
Pending
Concerns about slower economic growth and higher inflation are leading investors to perceive the US government as a riskier investment, driving up treasury yields.
"people are concerned about the economy and inflation the most recent economic data that we got is essentially saying that our economy grew slower than expected and the inflation data says that inflation grew harder than expected and because we got these pieces of information people are more concerned about the economy and inflation and because of that they look at the United States government as a riskier investment"
Pending
In 2024, treasury yields have increased due to investor demand for higher returns in response to economic concerns.
"investors will then want a higher return and that's why recently in 2024 we've been seeing treasury yields go up because investors have been demanding higher returns"
Pending
Rising treasury yields directly correlate with increasing mortgage rates, as mortgage borrowers are seen as a riskier investment than the government.
"if treasury yields are going up your mortgage rates also going to go up because you are a more risky investment than the government"
Pending
When considering buying a home, ensure affordability by accounting for the down payment, monthly mortgage payments, and moving/initial costs.
"if you want to go out and buy a home that's fine just make sure you can afford it and when I say afford it that means you got to afford three things number one I want you to afford the down payment number two I want you to afford the m payment and number three I want you to afford the moveing costs"
Pending
A minimum 20% down payment is recommended for home affordability, to secure better interest rates, avoid PMI, and build equity.
"when it comes to the down payment what I like to see is at a minimum 20% down I know that's kind of unheard of in today's economy but if you really want to be able to afford it get the best interest rates not have to pay PMI and have some equity in your property get 20% down"
Pending
Monthly housing costs should not exceed 25% of one's actual take-home pay to ensure financial flexibility.
"you want to afford the monthly costs now again I have kind of an aggressive approach here where I don't want my monthly cost to be more than 25% of my take-home pay yes take-home pay not my GRS pay my actual take home pay"
Pending
The Federal Reserve did not cut interest rates by their May 1st meeting as previously suggested, and a future rate hike is a possibility.
"the Federal Bank said that they would be cutting interest rates by their May 1st meeting which didn't happen maybe we're going to see another potential interest rate hike in the future"
Pending
There is a serious possibility that the next move in interest rates will be an increase, not a decrease.
"you have to take seriously the possibility that the next interest rate move will be upwards rather than downwards"
Pending