This past week has been a wild one when it comes to mortgage interest rates. Last week inflation numbers came in as expected or higher. Then the employment numbers for August came in much better than expected. Interest rates jumped at the end of last week as investors expected at least one, maybe two interest rate hikes by the Fed.
So this week the Fed met and yesterday made the announcement that they were increasing the federal funds rate by .25 point. That was widely expected by many and really already priced into mortgage rates. What many people do not understand is that when the Fed changes rates, it doesn’t directly affect mortgage rates. It does affect things like HELOC’s that are usually adjusted based on prime, so many with HELOC’s will see those rates increase by .25 point.
The markets are pricing in one more rate increase this year. Goldman Sachs expects another increase in October. Part of this will depend on economic reports that are coming in before the next meeting.
Mortgage rates do not move 1-1 with the Fed. They tend to track the 10 year Treasury, which reached it’s highest level since 2007 around the Fed decision. This is a sign that mortgage rates could remain elevated.
Mortgage rates are now at their highest level in awhile. Average rates are over 7% at this point. In the past few years, rates were over 7% in 2023 for 15 weeks, in 2024 they were over 7% for 6 weeks and last year they were over 7% for 2 weeks. These are average rates and your rate will vary based on credit, down payment and your mortgage program.
Builder confidence also fell this month. The National Association of Home Builders index of sales fell 3 points to 32 in September, it’s lowest in a year. A score below 50 means more builders see conditions as poor rather than good, 38% cut prices and 66% offered incentives.
Inflation could lead to another rate increase. The Fed raised the federal funds rate because inflation remains above its 2% target. If inflation remains high, we could see 1-2 more rate increases this year.
There are things you can do to help with a mortgage payment. Some will buy down the rate, but you want to look at the cost vs reward and make sure it makes sense. Another option is a 1-0 or 2-1 temporary buydown to lower the rate for the first year or two. Talk with your loan officer about options.
Leslie Vanderwerf, NMLS ID#335509, CrossCountry Mortgage LLC, An Equal Housing Lender, NMLS#3029 – Email – Website
