Short Term Rental Riches 318. Interest Rates EXPLAINED for Real Estate Investors
Dec 16, 2025
Interest rates may seem dull, but they hold the key to savvy real estate investing. Discover how falling rates could mean explosive demand and higher home prices, and learn the vital differences between federal funds, prime rate, and mortgage rates. Understand the 10-year treasury yield's pivotal role in shaping the mortgage landscape. Get practical tips on refinancing, buying strategically, and diversifying your portfolio. With rates dropping, it's the perfect time to make informed moves in the real estate market!
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10-Year Yield Drives Mortgage Rates
- The 10-year Treasury yield sets the base for long-term mortgage pricing and lenders add about 2% on top.
- When the 10-year yield rises mortgage rates rise, and when it falls mortgage rates fall.
Why The Fed Changes Rates
- The Federal Reserve adjusts the federal funds rate mainly to control inflation and respond to economic outlook indicators like GDP and jobs.
- Lower job growth and controlled inflation create room for the Fed to lower rates and make borrowing cheaper.
Prime Rate Explains Short-Term Loan Pricing
- The prime rate is used for short-term loans and is roughly the federal funds rate plus about 3%.
- Banks add this spread to cover costs and earn profit, and individual rates vary with creditworthiness.