Bitcoin, The Fed, and Interest Rates
One might expect interest rates to be higher as financial markets surge, and speculative stocks and cryptocurrencies climb almost daily. While the November non-farm employment report exceeded expectations slightly, it was close enough to consensus to make a ¼ point Fed Funds rate cut likely later this month. Once again, the U.S. remains the global leader for investment, driven by ongoing challenges in Europe—such as the no-confidence vote in France—and the declaration of martial law in South Korea. These geopolitical issues have bolstered the “safe-haven” trade, contributing to lower domestic yields. That said, we would not be surprised to see interest rates drift higher given these economic and market tailwinds.
Current interest rate levels are not particularly restrictive, as financial conditions appear fairly loose. Spreads on corporate debt remain tight, and capital continues to flow into riskier assets. However, parts of the market are signaling excessive risk appetite. For instance, the use of leverage in cryptocurrency and meme stock trading is concerning, as it magnifies both gains on the way up and losses on the way down. The notion that markets can only move higher is worrisome (remember trees don’t grow to the sky), but momentum is currently driving trends upward and investors are feeling confident for the moment.
Impact on Real Estate
Today’s market environment is driving increased activity in the real estate lending space:
- Increased Loan Activity: Business owners, buoyed by post-election confidence, are reinvesting in their businesses, leading to more refinances and lines of credit.
- Active Homebuyers: Buyers who were previously on the sidelines are now actively searching for homes, encouraged by an improving economic outlook.
- New Loan Products: Banks, both large and boutique, are ramping up for 2025 with innovative loan programs to drive volume. Borrowers and lenders alike are eager to transact, creating optimism for the year ahead.
We remain optimistic about 2025, as both the demand for lending and the willingness of banks to provide capital appear to be aligning positively. Borrowers have accepted higher rates and the need to transact is trumping the need to wait for lower interest rates.
Finally, please find below an article written by Insignia Mortgage’s co-founder, Damon Germanides, on the critical role of mortgage brokers in today’s market. At Insignia Mortgage, we dedicate significant effort to identifying unique lenders to meet the needs of our diverse clientele. We hope you find the article insightful:
Read the Article: Mortgage Brokers Will Excel With the Cheap Debt Era Over
