You may have heard that the Federal Reserve has been cutting rates to slow economic slowdown. Industry experts predict that they may cut the Fed rates again this week. It would be a surprise to the economy if they did not follow through with another cut. With this said, it is important to know that this does not mean that mortgage rates will be lowered.
The only mortgage rates that may be tied to the Fed Funds Rates are home equity lines of credit (HELOCs). When it comes to primary 1st mortgages the effects have already taken place. This is because the bond market dictates mortgage rates in real-time whereas the Fed only meets every 6 weeks.
Bond traders use expectations of what the Feds may do when trading bonds which determines mortgage pricing. This is what they have been doing for weeks and weeks up to this point.
“This leaves more potential for mortgage rate increases rather than rate drops. “
Even when it comes to long term rates like mortgages, they do not always follow the Fed Fund Rate trends. Currently, longer term loans are low relative to Fed Funds Rates. This leaves more potential for mortgage rate increases rather than rate drops.
With this being said, borrowers should not focus on the Fed’s cuts/hikes. They should measure if this very moment makes sense to refinance or upgrade to a larger home. The current mortgage rate volatility makes it nearly impossible to predict if rates are going up or down from here.
Mortgage rates are already near historic lows. If you are interested in a mortgage quote, your preferred mortgage broker, Riverbank Finance would be happy to run the numbers. Call us at 800-555-2098 or request information below!