Explaining What’s Happening to Interest Rates

Here’s what you should know about our rapidly changing interest rates.


Why are mortgage rates rising? When will they go back down or go even higher? I was recently interviewed by to talk about this. Here’s a link to the interview if you’d like to read it.


Going back to the topic of mortgage rates, we have a lot of uncertainty in the real estate market and the global economy today. When you ask what interest rates are doing, there are two driving forces behind it that we need to look at: The first thing is the traders’ level of uncertainty and their appetite to buy mortgage-backed securities. The second one is that interest rates tend to closely follow the ten-year Treasury yield. 


What we know thus far is that as rates continue to be increased by the federal government in the central banks, the ten-year Treasury yield becomes more attractive, and the yields go up. Typically, mortgage-backed securities or interest rates trade somewhere about 100 to 120 basis points above those ten-year Treasury yields. If the ten-year Treasury yield is 3%, you should expect to see an interest rate of around 4.5%. However, in times of uncertainty, yields go further and further apart, and they get as much as 300 or 350 basis points apart.


When this happens, the ten-year rate is around 3%, but then mortgage interest rates are around 6%. Eventually, some of that uncertainty goes away. The tenure stays where it is, and mortgage rates snap back to their normal levels of 100 to 150 basis points. In fact, we saw this happen last week. Consumer inflation came out a little bit softer than expected, and overnight, you saw interest rates go from 7% to 5.5% and then to 5.75%. 

Why does this matter for homebuyers and sellers? You have to pay attention because the market is moving fast. We’ve rarely seen volatility like this, but volatility creates opportunity.  Reach out to one of our agents, and we will help you take advantage of the opportunities in this market. I look forward to hearing from you!