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As you have likely already heard, the Fed reduced the Fed Funds Rate by .5%. No… mortgage rates did not go down by .5%!
Mortgage rates actually ticked up a bit. Why? Let’s break it down…
The Fed Funds Rate is controlled and set by the government. Mortgage rates are market-driven by Wall Street bond traders. The mortgage market had already anticipated the Fed would make the cut, and mortgages had already seen a significant drop prior to the announcement, falling from over 7.5% at the end of April to the current rate of around 6.22%.
Food for thought: since May 1st, mortgage rates have dropped almost 1.25%. On a $450,000 FHA mortgage, this translates to a MONTHLY SAVINGS of $366!
What happens next? Mortgage rates are expected to continue decreasing step by step through 2025, potentially reaching the low 5's. The trend will not be a straight line, with some fluctuations along the way.
The Fed forecasts another 0.25% reduction in the Fed Funds Rate at both the November 7 and December 18 meetings, with an additional 1% reduction expected in 2025. Mortgage rates will generally follow this trend.
Fed Chairman Jerome Powell stated, “But I think as we normalize rates, you’ll see the housing market normalize. And I mean, ultimately, by getting inflation broadly down and getting those rates normalized and getting the housing cycle normalized, that’s the best thing we can do for householders.”
In essence, mortgage rates are projected to continue dropping. When they reach a reasonable and normalized level, many existing homeowners, currently hesitant to move due to low interest rates, may finally feel comfortable selling their homes and purchasing new ones.
The likelihood of home prices decreasing remains extremely low. Home prices have risen in 2024, despite high interest rates and one of the lowest numbers of transactions in history.
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The information contained is the viewpoint of the presenter(s). Individuals should consult their own financial representative.
Estimated Mortgage Payment is for exemplary purposes only. Contact a licensed loan officer for exact numbers and APR. Additional rates and terms may apply and are subject to change without notice. Loan scenario assumes a purchase price of Zillow's list price and a 10% down payment. Points and fees not included. Property tax, homeowners insurance, mortgage insurance, and HOA fees are approximate and may vary. Other fees may apply. Product displayed is a conventional 30-year fixed rate mortgage using the current average rate as shown on Mortgage News Daily (mortgagenewsdaily.com).
Estimated Qualifying Income assumes a homebuyer has a FICO score above 740, no other credit debt, and a debt-to-income (DTI) ratio of 43%.
For exact numbers and APR or to run a loan scenario based on your own credit and income, contact our office at (858) 259-8700.
Rate Source: Mortgage News Daily. Rates displayed are approximate, subject to change, and do not necessarily reflect rates available to you. MND’s methods involve an objective component based on lenders' raw prices as well as a subjective impression from their network of originators. For more information about how these rates are calculated, visit www.mortgagenewsdaily.com/mortgage-rates/about.
Mortgage News Daily (MND) is a trademark of Brown House Media, Inc. Zillow is a trademark of Zillow, Inc. CrossCountry Mortgage has not been authorized, sponsored, or otherwise approved by Brown House Media, Inc. or Zillow, Inc.
Equal Housing Opportunity. All loans subject to underwriting approval. Certain restrictions apply. Call (858) 259-8700 for details. All borrowers must meet minimum credit score, loan-to-value, debt-to-income, and other requirements to qualify for any mortgage program. CrossCountry Mortgage, LLC is an FHA Approved Lending Institution and is not acting on behalf of or at the direction of HUD/FHA or the federal government. CrossCountry Mortgage, LLC is not affiliated with or acting on behalf of or at the direction of the Veteran Affairs Office or any government agency. Certificate of Eligibility required for VA loans. By refinancing, the existing loan total finance charges may be higher over the life of the loan.
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