One of the questions I’m asking daily is what is happening with rates and when will they start dropping? This is a post from one of our blogs that helps explain a little of what is going on.
If you’ve been keeping an eye on mortgage rates lately, you might feel like you’re on a roller coaster ride. One day rates are up; the next they dip down a bit. So, what’s driving this constant change? Let’s dive into just a few of the major reasons why we’re seeing so much volatility, and what it means for you.
The Market’s Reaction to the Election
A significant factor causing fluctuations in mortgage rates is the general reaction to the political landscape. Election seasons often bring uncertainty to financial markets, and this one is no different. Markets tend to respond not only to who won, but also to the economic policies they are expected to implement. And when it comes to what’s been happening with mortgage rates over the past couple of weeks, as the National Association of Home Builders (NAHB) says:
“. . . the primary reason interest rates have been on the rise pertains to the uncertainty surrounding the presidential election. Although the election is now complete, there continue to be growing concerns over budget deficits.”
In the short term, this anticipation has caused a slight uptick in mortgage rates as the markets adjust and react. Additionally, factors like international tensions, supply chain disruptions, and trade policies can drive investor sentiment, causing them to seek safer assets like bonds, which can indirectly impact mortgage rates. Essentially, the more global or domestic uncertainty, the greater the chance that mortgage rates may shift.
The Economy and the Federal Reserve
Inflation and unemployment are two other big drivers of mortgage rates. The Federal Reserve (the Fed) has been working to bring inflation under control, and has been closely monitoring the economy as they do. And as long as inflation continues to moderate and the job market shows signs of maximum employment, the Fed will continue its plans to cut the Federal Funds Rate.
Although the Fed doesn’t set mortgage rates, their decisions do have an impact, and typically a cut leads to a mortgage rates response. And in their November 6-7th meeting, the Fed had the data they needed to make another cut to the Federal Funds Rate. And while that decision was expected and much of the mortgage rate movement happened prior to that meeting, there was a slight dip in rates.
What To Expect in the Coming Months
As we look ahead, mortgage rates will respond to changes in the Fed’s policies and other economic indicators. The markets will likely remain in a wait-and-see mode, reacting to each new development. And, with the transition of a new administration comes an element of unpredictability. A recent article from The Mortgage Reports explains:
“Today’s economic indicators come with mixed pressures on mortgage rates and we’re likely to be in for a good amount of volatility as markets adjust and respond to the election . . .”
The best way to navigate this landscape is to have a team of real estate experts by your side. Professionals will help you understand what’s happening and can provide you with the guidance you need to make informed housing market decisions along the way.
Bottom Line
The takeaway? Today’s mortgage rate volatility is going to continue to be driven by economic factors and political changes.
Now is the time to lean on experienced professionals. A trusted real estate agent and mortgage lender can help you navigate through it. And with the right guidance, you can make informed decisions.
This post is from our blog at Keeping Current Matters. I will add that the majority of the uncertainty comes from the economic reports changing – there are a lot of factors that go into mortgage interest rates and the investors are always looking to the future. That is why when the Fed drops rates (or raises them), the mortgage rates don’t always follow. Usually they have already priced in what they expect to happen. When the Fed dropped rates in November, the .25 point drop was already priced in, what was more important was what the Fed said after their meeting. Right now, the Fed is expected to drop rates another .25 point in December and again, what will be more important is what they say – as long as they do drop rates by that amount. Interest rates are always changing, so contacting your loan officer and talking about your situation is the best way to plan. We can do is tell you what is currently going on and what we think may happen, but there are so many things that can affect rates, we never know for sure!
Leslie Vanderwerf, NMLS ID#335509, CrossCountry Mortgage LLC, An Equal Housing Lender, NMLS#3029 – Email – Website
