Time for a Friday Flight- our little sampling of the week’s financial news and what it means for your personal finances. There are a lot of headlines out there, but we boil them down to specific takeaways that will allow you to kick off the weekend informed and help you to get ahead with your money. In this episode we explain some relevant and helpful stories like:
- RATE CUTS
- Pricey porch pumpkins
- Recency bias and expecting the rosiest returns
- Twitter for trading
- Job hugging
- Tips only please (no taxes on tips)
- 401k raiding to pay down debt
- Sticking it through a divorce (bc the mortgage rate is too good)
- Saving for a spouse
- AI for investing advice
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Best friends out!
Thank you for all of the wonderful information that you provided, and I really enjoy your interviews with other experts, especially when they involve discussions regarding psychology and money.
On your 9/21 Friday Flight episode, you discussed the Fed rate cut and how it may affect mortgage rates. Until recently, I thought this was how mortgage rates were set, but I recently learned from another podcast that they are actually based mostly on the 10 year Treasury rate.
This is from Fannie Mae:
Key Factors Influencing Mortgage Rates:
10-Year Treasury Note: The 10-year Treasury note is a key benchmark, and mortgage rates are often set by adding a “spread” or premium to this rate.
Investor Spreads: Investors demand a higher return for the added risk of holding mortgage-backed securities compared to U.S. Treasury notes, which adds a spread to the rate.
Monetary and Fiscal Policy: Decisions by the Federal Reserve and government spending influence the economy, which in turn affects interest rates.
Economic Growth and Inflation: A strong economy and high inflation generally push mortgage rates higher, while a weak economy and low inflation tend to drive rates down.
Investor Expectations: Market expectations about the future direction of the economy and inflation significantly impact bond markets and, consequently, mortgage rates.
Thanks for the comment Jason- yes, you’re correct, longer term treasury yields (not the fed funds rate) have more of a direct impact on mortgage rates as they tend to track together. We’ve talked about this in depth before, and though it’s a nuanced conversation, historically speaking the fed funds rate certainly does have a indirect impact on mortgage rates, especially 30 year fixed mortgages.