Why Mortgage Rates will fall in 2024
<p>The Federal Reserve (Fed) meets regularly and announces, with great fanfare, its “Federal Funds Rate(FFR).” But what is this interest rate and what does it influence?</p>
<p>The FFR is the rate at which commercial banks borrow and lend their excess reserves to each other overnight. It is this rate which impacts the interest rate on many consumer loans, such as credit cards and automobile loans, but NOT 30-year Fixed-Rate Mortgages (FRM).</p>
<p>In general, FRM are sold to Fannie Mae and Freddie Mac and are bundled into portfolios which are sold to investors as Mortgage-Backed Securities (MBS). The yield investors demand for MBS is based upon the yield on the US Treasury 10-year (10T) yield, and the extra yield investors want to buy MBS rather than just risk-free Treasuries.</p>
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