There’s a lot of talk in the news these days that the Federal Reserve Bank (FED) is expected to CUT rates in later this month!   But what’s that mean?

Just a quick reminder:  These articles I share here are researched and written by me!  As part of my commitment to ongoing support for my clients and partners, I write these articles to help them understand what’s really happening in the markets, beyond the headlines and soundbites.

The rate the FED is expected to cut is the Federal Funds Rate – the rate at which banks lend money to one another.

This is NOT directly related to mortgage interest rates.  For example, if the FED reduces rates by .25%, that does not mean that the rate for a 30-year fixed conventional mortgage is .25% lower the next day.

In fact, even though the FED is expected to cut rates later this month, it’s possible that mortgage rates remain mostly unchanged.  It’s also possible that rates could go up (see #2)!  Why?

There are three primary ways that mortgage interest rates can drop:

1. ✂️ Federal Reserve (FED) cuts rates. BUT! When the Fed cuts rates, mortgage rates don’t always fall; they might rise based on market perceptions. Currently, a Fed rate cut is expected to lower mortgage rates as it signals a weaker economy, reducing bond yields.

2. 📉 Bond markets anticipate a FED cut: If labor market data worsens significantly before the next FED Meeting, mortgage rates could drop as markets anticipate a FED cut. Markets often adjust in advance anticipated changes.  If the market begins to anticipate a .5% cut, for example, and the FED announces a .25% cut, it’s possible that mortgage rates could actually go up, as the market anticipated a bigger cut than the FED announced.

3. 📊 Fixed mortgage rates have followed the yield of the 10-year Treasury bond for decades. In recent years, the spread between these two has widened due to market uncertainty. As stability returns and confidence grows, this spread can narrow, leading to lower mortgages rates WITHOUT any FED action. (Check the chart!)

One advantage of Forward Mortgage is that we consistently monitor the financial markets for any refinance opportunity for our clients.  We understand & monitor this stuff so that you don’t have to!

We understand that purchasing a home is likely the biggest investment you’ll ever make. That’s why we’re here to help you navigate every step of the process, ensuring that you fully understand this significant commitment. Your home is more than just an investment—it’s where your life happens, and we’re dedicated to helping you make informed decisions with confidence.

If you find this interesting or helpful, please feel free to share it with a friend, family member, or co-worker – it’s my goal to educate and empower as many people as possible during this incredibly unique time in housing!

Here is how I can help!

– If you are looking to purchase a new home or have questions about your mortgage, the market, getting preapproved, etc., or

– If you are a Realtor or a Broker looking for a lender with great financing solutions to help educate your clients on the state of the market to help them feel good about their decisions,

Please call today – I am happy to help however I can!

Brian Mutter a twenty-year veteran of the mortgage and real estate industry.  His experience across nearly all aspects of real estate makes him an incredibly well-rounded problem-solver.  His clients are treated to a white-glove client experience every single time.  Education, information, and communication are the cornerstones of his approach.

☎ 248.956.0445   📧 brian@goforwardmortgage.com 

🌐 www.goforwardmortgage.com