If you’ve been following the news, you might have heard that the Federal Reserve cut interest rates on September 18, 2024, by 50 basis points (0.5%). But, despite this cut, mortgage rates have recently increased, leaving many homeowners and potential buyers confused. Let’s break down what’s going on and how it affects your buying or refinancing decisions.

Fed Rates vs. Mortgage Rates: What’s the Difference?

While the Fed’s rate and mortgage rates may seem connected, they’re not the same thing. The Federal Reserve controls the federal funds rate, which is the interest rate banks charge each other for short-term loans. This rate influences things like credit card rates, auto loans, and savings account interest, but it doesn’t directly set mortgage rates.

Mortgage rates, on the other hand, are influenced by a variety of factors, including:

• The bond market: Mortgage rates often follow the yield on 10-year Treasury bonds.
• Inflation: Rising inflation can push mortgage rates higher.
• Economic outlook: If the economy is expected to grow, rates might increase as lenders anticipate more borrowing.

Why Mortgage Rates Might Rise After a Fed Cut

You might wonder why mortgage rates have increased even after the Fed’s recent rate cut. That’s because mortgage rates respond to long-term economic trends, not just short-term actions by the Fed. If investors expect inflation to rise or if there are concerns about the economy’s future, they might push mortgage rates higher, even if the Fed is lowering its rates.

How This Affects You

1. Buying Power: Higher mortgage rates mean your monthly payments will be larger, which can reduce the amount of home you can afford. A small rate increase can make a big difference in your overall costs.
2. Refinancing: If you’re thinking about refinancing, it’s important to pay attention to current mortgage rates. Even if the Fed cuts rates, it doesn’t guarantee mortgage rates will follow. It’s all about timing!

The Importance of Staying Informed

Because mortgage rates are influenced by so many factors, it’s important to stay in touch with a trusted mortgage broker. They can help you navigate the market and figure out the best time to buy or refinance. Rates can change quickly, and having someone local who understands the California market can make all the difference.

Work with a Trusted Local Expert

As a highly rated mortgage broker, I, Jeanine Nucum, provide my clients with hands-on assistance and the latest market updates. Whether you’re buying your first home or thinking about refinancing, I’m here to help you make smart decisions.

Conclusion

Understanding the difference between the Fed’s rate cuts and mortgage rates is key to making informed decisions about buying or refinancing a home. While the Fed’s actions can influence mortgage rates, other factors like inflation and the bond market play a big role too. To stay on top of these changes, it’s important to work with a local mortgage broker who can guide you through the process.

Feel free to reach out to me, Jeanine Nucum, for personalized advice and up-to-date market information. Let’s work together to find the best loan options for you!