Mortgage Rates Kevin Baum September 10, 2024
The Federal Reserve (The Fed) is poised to make a significant move that could ripple through the housing market. Experts predict a cut to the Federal Funds Rate at their upcoming meeting, mainly fueled by cooling inflation and a slowing job market. This decision holds potential benefits for both homebuyers and sellers, so let's break down what it all means for you.
Why a Federal Funds Rate Cut Matters
The Federal Funds Rate plays a crucial role in influencing mortgage rates. When the Fed cuts this rate, it sends a signal about the broader economy, and mortgage rates tend to follow suit. While a single rate cut might not cause a dramatic drop in mortgage rates, it could contribute to the ongoing gradual decline we're already witnessing.
As Mike Fratantoni, Chief Economist at the Mortgage Bankers Association (MBA), points out:
“Once the Fed kicks off a rate-cutting cycle, we do expect that mortgage rates will move somewhat lower.”
Furthermore, this likely won't be a one-off event. Experts foresee multiple rate cuts extending through next year.
Lawrence Yun, Chief Economist at the National Association of Realtors (NAR), says:
“Generally, the rate-cutting cycle is not one-and-done. Six to eight rounds of rate cuts all through 2025 look likely.”
Projected Impact on Mortgage Rates
Industry forecasts point to a continued gradual decline in mortgage rates, partly fueled by the Fed's anticipated cuts. The graph below shows the latest forecasts from Fannie Mae, MBA, NAR, and Wells Fargo (see graph below):
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