Home Loan Interest Rates Explained with Jeff Berger

Speaker 1 (00:00):
Hello, groundwork friends. Thank you for being here with me. Our groundwork team in St. Louis and Kansas city has received a tremendous amount of questions recently about mortgage rates and specifically prevailing 30 year fixed mortgage rates. And we’ve been receiving these questions, uh, over the last couple of days from Friday to today, primarily because there’s been some change. And that is a fundamental point that we want to communicate here today. Markets move markets, change rates change. They change daily. They change hourly. They change weekly. They change monthly mortgage operates in a live fully functioning and dynamic market. And we get that as things change, our friends, our home builder, friends, new home sales professionals. Our customers have questions. We get that. That’s one of our key attributes. And so we thought it would be helpful, efficient, maybe even powerful, uh, to get information out and educate and share, which we love to do about some of the change that we’re observing and how to keep that change in context.

Speaker 1 (01:07):
So between last week on Friday, and today we have seen a change in prevailing 30 year mortgage rates from approximately 5.5% 30 year fixed to 6.38, 9%. Jeff, what caused the change? As I mentioned earlier, mortgage operates in a live dynamic, fully functioning market. And that marketplace is responding to the input of information at all times, and factoring that information into price, which correlates to rate last week, several agencies and bureaus reported data and information about the status of the us economy, inflationary measures, and other data points, which were responded to by the market and specifically the federal reserve, which is having a monetary policy meeting this week. It has been anticipated that the federal reserve would adjust its funds rate and the mortgage market is constantly responding to that information, but the new inputs on Friday and new forecast and anticipation of how the federal reserve might respond to those inputs caused a reaction in the market.

Speaker 1 (02:22):
Again, five and a half to 6.38, nine. What’s important is that this is normal. This is how markets function and operate. They’re not static, they’re dynamic. And as an independent mortgage expert and mortgage advisor, our role and responsibility is to educate, inform and share this information with our customers, new home sales professionals and builder partners. But it’s important to take the information that we have and keep it in context while this is change week over week, we have great context and information to help educate and inform us about where we are today, relative to where we’ve been. And the point is we’ve been here before we have a great resource. There’s a lot of resources, uh, about mortgage rates out on the internet. We think some are better than others. We think your groundwork team is the best available resource, but we’re very fortunate here with the St Louis federal reserve bank and some excellent data that they track in the us market over long periods of time in what’s known as their Fred data system.

Speaker 1 (03:31):
And we can look to that information for context to understand that very recently, we have seen 30 year fixed prevailing Mar mortgage rates, very similar to where they are today. And that’s helpful for us to understand, gives us knowledge and confidence about what’s happening and how to manage plan and prepare for it. So, for example, as recently as November of 2018 prevailing rates, we’re 5%. They’ve been approximately five and a half percent as recently as April of 2010. And again, we can look back to a more recent period of time, not too distant may of 2000 to see that at that time rates prevailing on 30 year fixed were eight and a half percent. So between 5% and eight and a half percent relatively recently as a benchmark for where we see mortgages today, what does that mean? What it means is we’ve been here.

Speaker 1 (04:30):
This is normal, and the market is functioning as the market does to respond to data and information at moments in time. So rather than focus on daily or hourly information, we think it’s helpful for our customers, our partners, new home sales professionals, to take the information and factor it into context as a better way to understand it. And here’s the point? What does the change really mean, Jeff? Well, what the change really means for an average groundwork customer making an investment in a newly built home in St. Louis or Kansas city is approximately $159 a month, indifference in payment as between five and a half percent and 6.38, 9%. It is change. It is an additional investment, but in the context of what we’re purchasing residential real estate in the United States, in the state of Missouri, it’s really important to understand that it’s manageable. In fact, that $159 talking to our teammates in Kansas city is about the equivalent of one family dinner a month at jacks stack barbecue for the team here in St.

Speaker 1 (05:43):
Louis. It’s about the equivalent of one family dinner a month at sugar fire smokehouse. We like barbecue here. So we use barbecue dinners as a benchmark for things to help us understand what this change really means. So the point is this investment is different. It is slightly more, but in the context it’s infinitely manageable, especially because what we’re talking about, investing in, what we’re talking about purchasing is residential real estate in the United States. Real estate is an asset, and we can look to other data points over time to understand how that asset increases in value over time. An excellent, incredible data source C E I C. Data looks at a long time horizon from 1992 to 2022, and helps us understand that year over year during an extended period of time. Residential real estate in the United States has increased in value 5.3% per year, year over year.

Speaker 1 (06:50):
So the context of $159 investment, a barbecue dinner investment each month in an asset that’s proven to appreciate over time makes really great sense to us, to our customers and our partners. So understand where we are and why understand that where we are is where we’ve been fairly recently with credible inputs to help us and instruct and guide us, understand that what we’re investing in is an asset that has value over time. And always remember this mortgage that we’re talking about today is one of the most refinanceable products and programs in credit consumer credit in the United States. And so if, and when the market improves and we return to a different status on rate, if there’s value, we can always revisit how to efficiently and effectively realize that value potential together with groundwork in the future. We hope that this information helps have confidence, knowledge and understanding. We love sharing and educating as a trusted advisor, we believe it’s so important to be working with a local independent mortgage expert to help you understand how to factor this information into your investment decisions. There’s always products, programs, capabilities, and investments for groundwork to match your new home purchase goal. Thank you very much. Have a great day and be successful in this marketplace.