So, the Fed cut rates yesterday, now what? After nine months of holding steady, the Federal Reserve cut the Fed Funds Rate by 25 basis points yesterday. This was expected and the mortgage market had already lowered mortgage rates in anticipation of this. So, how did the mortgage market respond? It is important to note that the market reaction was more related to the comments by Fed members after the meeting rather than the rate cut decision itself. That is because their comments provide a insight into their plans for future cuts. So, what did Fed members say, what do they anticipate, and how will that move mortgage rates (or not)?

What Happened Yesterday?

The Fed Funds Rate was cut from 4.25% to 4% on September 17^th. Fed Chair Jerome Powell said the Fed’s policy has been restrictive, signaling the potential for additional cuts. They noted that the Fed’s primary focus had been inflation, but due to recent declines in the labor market, they are shifting focus to job creations and unemployment. This puts jobs reports further into the spotlight right after President Trump’s recent replacement of the head of the Bureau of Labor Statistics. This morning, the BLS reported an improvement week-over-week in Initial Jobless Claims and Continuing Claims. While the numbers for both were still significantly elevated, they each decreased. This sent mortgage rates up because an improvement in the employment numbers would potentially decrease the possibility of another rate cut. This is a great example of how mortgage rates are anticipatory rather than reactionary to Fed Rate decisions. So, what do we expect the Fed to do next?

What Will The Fed Do Next?

The dot plot from yesterday’s meeting showed that

1 Fed member wants to raise rates

6 Fed members want to keep rates steady

2 Fed members want 25 basis points of cuts

9 Fed members want 50 basis points more of cuts

1 Fed member wants 125 basis points of cuts

Based on this data, experts are predicting two more 25 basis point cuts this year with one on October 29^th and another on December 10^th.

Where Are Rates Now?

As of noon today, Freddie Mac reported yet another weekly drop in the average 30-year conventional mortgage rate dropping from 6.35% last week to 6.26% this week.

Source: Fredie Mac

If you purchased a home in the past two years, now is a great time to check your current mortgage interest rate to compare to current rates. This could be an opportunity to refinance and decrease your monthly payment. If you have any questions or would like to see how refinancing could impact your bottom line, reach out to us for a quick review.