This Market Update is written by our Capital Market specialists each week to bring you insight into what's happening in the market and how it may affect mortgage rates and real estate trends.
Rates are provided by Housing Wire in conjunction with Polly. Rates are updated in real-time. Polly data is calculated using actual locked rates. Rates are inclusive of locks that occur below par, at par and therefore consider discounts and rebates.
Market Commentary:
For the week of Sep 13th to Sep 19th, interest rates decreased. The Federal Reserve said Wednesday it was lowering its key interest rate by half a percentage point, an unusually aggressive move designed to cushion the economy from a further slowdown. The Fed believes Wednesday's cut and others likely over the next several months should put a floor under further economic deterioration.
Factors influencing mortgage rates:
Mortgage rates are determined by a number of different economic influences, including investor demand for mortgage-backed securities, the current rate of inflation, Federal Reserve policy, and even geopolitical uncertainty. In general, mortgage rates tend to go up when the U.S. economy is doing well or growing quickly, while slowing growth or a recession can push rates down.
Are mortgage rates and the federal funds rate related?
Yes, mortgage rates and the federal funds rate are related, but they don’t move in lockstep. The federal funds rate, set by the Federal Reserve, influences overall interest rates in the economy, including mortgage rates. When the Fed raises or lowers the federal funds rate, it affects the cost of borrowing for banks, which can then impact the rates they offer to consumers, including mortgage rates. However, mortgage rates are also influenced by other factors like inflation, economic conditions, and the bond market.
Mortgage rate predictions 2024:
Most major forecasts expect rates to continue to fall throughout the remainder of this year and 2025. But how much will mortgage rates go down? It depends on the economy and how quickly the Fed opts to lower rates.
Will mortgage rates go down in 2025?
Yes, mortgage rates are likely to go down in 2025. Average 30-year mortgage rates are currently below 6%, and they may fall further into the 5% range next year.
Fed Rate Cut: Winners and Losers:
Fed Watch:
Target rate (in bps) possibilities, according to the CME Group:
|
Upcoming Federal Reserve Meeting Dates |
0.25% Reduction (4.50% - 4.75%) |
0.5% Reduction (4.25% - 4.50%) |
0.75% Reduction (4.00% - 4.25%) |
|
November 7 |
65.1% |
34.9% |
0% |
|
December 18 |
32.3% |
50.1% |
17.6% |
|
January 29 |
0% |
0% |
21.1% |
Market Review:
Optimal Blue’s Production Metrics:
U.S. Housing Outlook - September 2024
Mortgage rates are coming down — and home buyers are ready to pounce:
Fantastic Fed:
In a move largely unexpected just days ago, the Fed cut the Fed funds rate by 50bps! This is an overt acknowledgement that the inflation battle is over, and that rising unemployment is now public enemy #1. While the Fed should have cut earlier, that doesn’t detract from this gutsy call. Fed policymakers expect rates to bottom at 2.875% in 2026. That’s probably too high. Pre-Covid the rate was 1.5%.
- Elliot Eisenberg, Ph.D. , Economist
News You Can Use:
- Fed slashes interest rates by a half point, an aggressive start to its first easing campaign in four years
- 10-year Treasury yield jumps as investors bet there’s no recession ahead
- The Fed just cut interest rates. How will your finances be impacted?
- If interest rates go down, do home prices go down? Not quite.
- Here are 4 ways the Federal Reserve's big rate cut could change the housing market
- Federal Reserve Board - Federal Reserve issues FOMC statement
*Communication is intended for Industry Professionals only and not intended for Consumer Distribution
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Interest rate and annual percentage rate (APR) are based on current market conditions as of 09/19/2024, are for informational purposes only, are subject to change without notice and may be subject to pricing add-ons related to property type, loan amount, loan-to-value, credit score and other variables. Estimated closing costs used in the APR calculation are assumed to be paid by the borrower at closing. If the closing costs are financed, the loan, APR and payment amounts will be higher. Contact us for details. Additional loan programs may be available. Accuracy is not guaranteed, and all products may not be available in all borrower's geographical areas and are based on their individual situation. This is not a credit decision or a commitment to lend. actual interest rate, APR, and payment may vary based on the specific terms of the loan selected, verification of information, your credit history, the location and type of property, and other factors as determined by Prosperity Home Mortgage, LLC. Not available in all states. Rate is as of 09/19/2024 and is subject to change at any time without notice. Opinions, estimates, forecasts, and other views contained in this document are those of Freddie Mac's economists and other researchers, do not necessarily represent the views of Freddie Mac or its management, and should not be construed as indicating Freddie Mac's business prospects or expected results. Although the authors attempt to provide reliable, useful information, they do not guarantee that the information or other content in this document is accurate, current, or suitable for any particular purpose. All content is subject to change without notice. All content is provided on an "as is" basis, with no warranties of any kind whatsoever. Information from this document may be used with proper attribution.
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