Why Have Mortgage Interest Rates Not Decreased Despite Federal Rate Cuts? | |
When the Federal Reserve lowers interest rates, many expect mortgage rates to follow suit. However, recent months have shown a disconnect between these two financial benchmarks. Despite two rate cuts by the Federal Reserve, mortgage interest rates have remained stubbornly high. This divergence leaves homeowners, real estate investors, and financial professionals wondering: why aren’t mortgage rates decreasing? The answer lies in the intricate interplay of inflation, the bond market, and the national debt.
The Federal Funds Rate vs. Mortgage Interest Rates
The Federal Reserve’s interest rate decisions primarily affect the federal funds rate, which is the interest rate banks charge one another for overnight loans. These changes influence short-term rates like credit cards and personal loans more directly than long-term rates, such as those for mortgages. Mortgage rates are tied more closely to the yield on 10-year Treasury bonds, which respond to broader economic conditions and market expectations.
The Role of Inflation in Mortgage Rates
Inflation plays a key role in determining mortgage interest rates. When inflation is high, lenders demand higher yields on long-term loans to compensate for the declining purchasing power of money over time. Recent economic data suggests persistent inflationary pressures, which has kept mortgage rates elevated despite Federal Reserve cuts.
The Impact of National Debt on Mortgage Rates
The U.S. national debt significantly influences mortgage interest rates. Here's how:
- Increased Government Borrowing: As the federal government borrows more to fund its operations, it issues Treasury securities to attract investors. With the national debt exceeding $33 trillion, the government must offer higher yields on these securities to compete for investor dollars. These higher yields on Treasury bonds directly influence mortgage rates, which tend to rise in parallel.
- Investor Sentiment and Risk: High national debt can erode investor confidence in the government's fiscal health. This perceived risk can lead to higher borrowing costs across the board, including mortgages.
- Crowding Out Effect: Large government borrowing can crowd out private investment, leading to tighter credit conditions and higher interest rates for consumers and businesses alike.
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1031 Exchanges Made Easy
Thursday, January 9, 2024
12:00 p.m. Eastern
Register
Join us for our "1031 Exchanges Made Easy" webinar, designed to provide you with a comprehensive yet straightforward overview of 1031 exchanges. We will also review the powerful benefits of 1031 exchanges. This session is perfect for real estate investors, business owners, their advisors and anyone interested in understanding the benefits and requirements of 1031 exchanges.
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Mastering Reverse and Improvement
1031 Exchanges
Thursday, January 16, 2024
12:00 p.m. Eastern
Register
Discover advanced strategies to overcome the challenges of seemingly impossible 1031 exchange situations by joining our comprehensive webinar on reverse and improvement 1031 exchanges. Designed for real estate investors and professionals, this session will provide you with the knowledge and tools to successfully navigate complex exchange scenarios. Our experts will guide you through the intricacies of these advanced exchange types and demonstrate how they can be the solution you need.
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Triple Play REALTORS® Convention & Trade Show, Atlantic City, NJ | |
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The annual Triple Play REALTORS® Convention & Trade Expo is one the largest real estate events in the U.S.! This collaboration of the New Jersey, Pennsylvania, and New York State Associations of REALTORS® is one of our favorite events each year! Lisabeth Patch, Katie Bromley, and Kristen McVeigh, CES® enjoyed meeting with REALTORS® and sharing ways 1031 CORP. can be a 1031 resource to them and their clients. We are already looking forward to next December!
During Triple Play, our Collegeville Branch Manager, Lisabeth Patch, was interviewed on the Signature Realty podcast to highlight the benefits of 1031 exchanges.
1031 CORP. president, Margo McDonnell, CES®, taught a 3-hour continuing education course during Triple Play that reviewed over a dozen case studies highlighting the power of 1031 exchanges.
Here are a few comments from attendees of Margo's class.
"As expected, you did a fantastic job presenting today at Triple Play!" - Bryan Cogliano, CFP®, Revolution, Berwyn, PA
"What an outstanding class today!" - Craig E. Fernsler, CCIM, KW Commercial, Blue Bell, PA
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PBI Real Estate Institute, Philadelphia, PA | |
1031 CORP. was happy to once again sponsor the PBI Real Estate Institute event hosted by the Pennsylvania Bar Institute to learn new ideas and fresh approaches to handling the challenging issues in real estate. Thank you to everyone who stopped by to say hello to Kristen McVeigh, CES®! Visiting with the attorneys we frequently work with is always a pleasure. | |
Wealth + Health Real Estate Summit 2024, Allentown, PA | |
1031 CORP.’s Cindi Platt-Elliott, CES® was a speaker at the Wealth + Health Real Estate Summit 2024 on how to use 1031 exchanges as an investment tool. This event focuses on building wealth through real estate investments while learning healthy practices to help you live your best life. A huge shout out to the hosts Jennifer DeJesus, Dr. Lindsey Duguet, Robert Musso, and Heather Gallagher for the invitation. | |
Investors Seminar, Newport Beach, CA | |
Jennifer Edmondson, our Bend, Oregon Branch Manager, joined Gaston Escudero III and the Bangerter Financial team to educate investors and commercial real estate professionals on the benefits of acquiring Delaware Statutory Trusts (DST) as 1031 exchange replacement property. | |
Team Spotlight: Cait Fling | | |
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Cait Fling
HR Relationship Manager
Collegeville, PA
Connect on LinkedIn
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Cait Fling serves
as the Human Resources Relationship Manager for 1031 CORP. In this role, she focuses on building relationships in order to increase engagement and identify opportunities for team members’ growth within the organization.
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Cait recently obtained her Gallup Global Strengths Coaching certification.
Can you tell us a little about CliftonStrengths?
CliftonStrengths is a strengths-based development tool that helps individuals identify their top talents and use them effectively. It focuses on what people do best, empowering them to grow and succeed by building on their natural abilities.
How does your work as a CliftonStrengths Coach help team members align their talents with their roles in the organization?
“As a Global Strengths Coach, I work with team members to identify their unique strengths and hidden talents. By understanding these strengths, I can help them see how their natural abilities align with their current roles or other opportunities within the organization. This alignment empowers them to feel more confident, engaged, and fulfilled in their work, which translates into higher productivity and better collaboration across teams."
How does this alignment ultimately benefit clients of the 1031 exchange company?
"When our team members are in roles that fully utilize their strengths, they perform at their best, delivering exceptional service to our clients. This ensures smoother transactions, faster problem resolution, and a more personalized experience. Our clients benefit from working with a team that is motivated, innovative, and committed to their success, which reflects the Company's values of providing an exceptional exchange experience made easy."
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Disaster Postponements for 1031 Exchanges | | |
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Exchanging Thoughts Blog
Check out Exchanging Thoughts, the 1031 CORP. blog, for more timely posts about 1031 exchanges and related topics.
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Serving as a nationwide Qualified Intermediary for 1031 tax-deferred exchanges since 1991, 1031 CORP. strives to provide an exceptional exchange experience made easy for our clients and their advisors. We provide our clients with enhanced security of funds, knowledgeable exchange professionals, and a commitment to keep the exchange process simple for our clients and their advisors. Our Exchange Team, which includes Certified Exchange Specialists®, has the experience and expertise to facilitate even the most complex exchange transactions, including reverse and improvement exchanges.
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