Last week I mentioned that the Fed was meeting this week and expected to drop rates by .25 point. Well that happened. I also mentioned that the rate cut was already priced into mortgage rates and any reaction would depend on the comments after the meeting. That happened too.
The rate cut happened because of rising unemployment even though inflation has been around 3% year over year. After the meeting the Fed Chairman shared his outlook. That didn’t help mortgage rates at all. The Fed announcement said that they were cutting rates by .25, they were also stopping their balance sheet runoff which should have helped mortgage rates. However instead of reinvesting the runoff from mortgage backed securities into overall treasuries, they said they were going to invest in Treasury bills that are short term. The bond market didn’t like these comments.
During Fed Chairman Powell’s speech he mentioned that the December 10th rate cut was not a “foregone conclusion – far from it”. The tone and how he answered the question about the possibility of a rate cut in December immediately sent mortgage rates higher. Investors look to the future for mortgage rates. Until Powell’s comments, most expected a rate cut in December, now it will depend on data that comes out before the meeting. With the government shut down, we are not getting employment numbers and inflation data is delayed.
For now, interest rates are a little higher than they were before the meeting. Today’s bond market was fairly steady which helped a bit. Yesterday’s rate cut will help those with home equity loans as they should drop by a .25 point in rate. It could also help with credit card rates and auto loans. As far as mortgage rates, more to come! Let’s hope for some good news – like lower inflation and that could help lower mortgage rates!
Leslie Vanderwerf, NMLS ID#335509, CrossCountry Mortgage LLC, An Equal Housing Lender, NMLS#3029 – Email – Website
