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Does The Bond Market Affect Interest Rates?

Updated: Feb 8, 2022

"People are buying bonds. The bond market is not affecting rates. The bond market are mortgage-backed securities, so it’s confusing for first-time home buyers and even move-up buyers and even real estate agents because there's a lot of lingo used by mortgage loan officers as we talk back and forth to other loan officers or in our team.

It is a big misinterpretation what the average consumer takes at or how they interpret that. The bond market is where we go to follow if mortgage rates are moving up or down. So

economic news events will change daily, so mortgage, the bond market, is exactly the same in the sense of the activity or a living, breathing market every single day. From the moment it opens into the moment it closes on a daily basis, it's a live market like the stock market. The stocks are very fluid and could be very volatile. Stocks are going up and down. Like probably watching airline prices.

As loan officers, we will follow economic news that's coming out. We already know what is going to come out every Monday morning as economic news reports are released, unemployment numbers, consumer confidence numbers… but it's a lot to digest, it's a lot for

the average consumer. We have experts. Every loan officer out there has a platform that has been watching interest rates for decades.

Every year in the past, whether it was a recession, whether it was high inflation whether it was a presidential election, whether unemployment was crazy, all of these news events are going to affect interest rates, but it's not a square peg and a square hole. It's we just have years of economic data based on how the market reacted when those events happened and where we are today and how we can predict the market. It’s not that you can have a crystal ball and predict exactly where it's going, but you see trends, you can follow those trends and figure out based on what it looked like back then. We're kind of sitting in the same place."

**I’ve invited Sharon Starke from Cardinal Financial to explain to me what it means when people say, “The bond market is affecting the interest rate.” For more updates and information about the real estate market, buying or selling homes, and other great content, you can also check out other episodes from our podcast:

Disclaimer: Views and information provided in this post are for general informational and educational purposes only and is not a substitute for professional advice. Before taking any action based upon such information, we encourage you to consult with the appropriate professionals. The use or reliance to any information contained on this site or mobile application is solely at your own risk.

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