The Federal Reserve ended it’s December meeting and skipped a rate hike for the third meeting in a row. No one expected the Fed to raise rates this month based on economic data but everyone was watching to see what the Fed Chairman said after the meeting.
In the press release after the meeting there was discussion about the economic activity slowing from it’s strong pace in the third quarter. Job gains have moderated since earlier in the year and the unemployment rate has remained low. Inflation has eased but remains higher than the Fed really wants to see.
The Fed has released projections showing that they would start cutting rates in 2024, early indications by the Fed show three cuts. Currently the Fed target range is between 5.25-5.5% and they expect to see rates closer to 4.6% by the end of 2024. This is the rate that banks charge banks overnight, not the rates that mortgage lenders see. The Fed doesn’t set mortgage rates but mortgage rates do correlate with the Fed’s policy actions. Right now the investors are looking at the possibility of a rate cut as soon as March but no one knows for sure. The employment and inflation reports between now and March will give us more of a clue – the better inflation is, the better chance for a rate cut. The next Fed meeting is January 30-31, 2024.
So how does this affect mortgage rates? The initial reaction was very positive and the bond market liked it. We’ll see how economic reports come in over the next few weeks. Ideally rates will slowly continue to drop and hopefully we have seen the last of the higher rates from a month or two ago! Mortgage investors tend to look in the future and try to guess what will happen. So any reports that differ from what they expect will make rates move – one way or the other! The other piece of good news is that as the Fed does start dropping interest rates, anyone with a home equity loan will see those interest rates drop and that will help lower payments on the HELOC’s.
If you are thinking about buying a home in the next few months, it may be a great time to get your mortgage approval done and start looking at homes. As we get closer to spring, we may see the market get a bit crazier and that may bring back the multiple offers from last spring. Let me know if you have any questions!
Leslie Vanderwerf, NMLS ID#335509, CrossCountry Mortgage LLC, An Equal Housing Lender, NMLS#3029 – Email – Website
