How will the mortgage market react to the Fed cut?
Mortgage rates have slid in recent weeks, falling below the 7% mark and providing welcome relief to homebuyers and owners grappling with high borrowing costs.
Still, those rates are unlikely to dip significantly in the immediate aftermath of today’s Fed announcement – namely because bond yields, which are often impacted by Fed decisions, were already pricing in a likely rate cut.
First American senior economist Sam Williamson suggested mortgage rates could briefly rise following the latest decision. “Should investors recalibrate their expectations after the September FOMC meeting for fewer cuts this year than currently anticipated, we may see Treasury yields, and consequently mortgage rates, rise in the short term,” he wrote. “In the medium term, we anticipate further, though gradual, declines in mortgage rates.”
Two further Fed rate decisions are penciled in for the remainder of the year: one on November 6-7, and the last on December 17-18.
Cuts are expected at each of those meetings, although Williamson cautioned that mortgage rates were unlikely to move low enough by the end of 2024 to spark a big uptick in homebuying activity.
