Everyone wants to know, will mortgage rates will go lower? The answer is I don’t know, and neither does anyone else. I’ve been following mortgage rates for 18 years now, I have found the predictions to be about as accurate as next week’s weather forecast.
What about the Federal Reserve rates cuts?
They recently cut the federal funds rate by 0.5% and are widely expected to make two more 0.25% rate cuts by the end of the year. That being said the fed doesn’t control mortgage rates, they control short term rates that banks pay to borrow money from each other. The fed rate does have a direct impact on short term rates. If you have an adjustable rate credit card or HELOC you should expect to see those rates drop accordingly. You would also expect savings account rates to follow a similar trajectory though maybe not at a 1:1 ratio.
Mortgage rates however are market driven, like the stock market. The mortgage bond markets moves based on anticipated future events. Expectations around inflation, employment levels, investor demand, the housing market, the broader economic environment, and yes even federal reserve policy all play into it.
The market has expected three rates cuts by the end of the year (last month’s plus the next two) for some time, so the feds predicted actions are already priced in. Mortgage rates today are the same to slightly higher than before the fed rate cut. Everyone expected it to happen, so when the fed did what was expected, not much changed.
Mortgage rates today are significantly lower than 1 year ago. I’ve been through several of these rate drop cycles throughout my career and I’ve seen a lot of people miss out on the opportunity to refinance because they were hoping rates would go lower, and rates actually went up. My advice is if you can save money right now with a refinance, do it, because none of us knows when this window will close. Same advice on purchases. If you can get into a house at a payment you can afford today, do it. If rates go up you may not able to afford that house anymore. In either case if rates do drop more, great, you can always refi to a lower rate later.
I’ll leave you with the mortgage rate forecasts from both the Mortgage Bankers Association and Fannie Mae for the next quarters. These organizations have teams of economists pouring over the data. They’ve been wrong before and they may be wrong this time, but its the best predictions I know of.
As you’ll see in the image below they predict we’ll be hovering around 6% into mid 2025. That’s in line with where rates are at today.
Comments