The Fed might raise rates three times this year. Financial journalists reported this breathlessly as if mortgages and the Fed funds rate share a direct causation that any economist would stake their tenure on. They do not.
Mortgages track the 10-year Treasury yield. The Fed funds rate moves overnight lending between banks. These are different things. Explaining this would require the author to understand bond markets instead of copying a press release from a company that sells mortgage refinancing services.
The article promises affordable lenders to help you save. Translation: affiliate links dressed up as journalism. Click through and discover that the affordable lender charges 4.2% while the expensive lender charges 4.3%. Your savings over thirty years will cover approximately one month of property tax. Congratulations.
Here's what actually happens when the Fed raises rates. Mortgage rates move based on what the market already priced in six months ago. By the time you read the headline, the move is done. Your local banker is not watching Jerome Powell's press conference and adjusting your rate in real time like a f*cking day trader.
The real story: someone needed to hit their content quota and remembered that mortgages scare people. Pair that fear with three affiliate links and you've got a business model. The Fed raises rates to cool inflation. Mortgages drift higher or lower based on complex factors that cannot fit in a headline promising to help you save.
Retail borrowers will read this article, panic, refinance at the wrong time, pay closing costs they cannot afford, and lock in a rate that's worse than waiting six months. The affordable lender will cash the check either way.
The Fed does not care about your mortgage, and your mortgage does not care about the Fed.
Photo by Jakub Żerdzicki on Unsplash
Leave a Comment