Tag: mortgage rates

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What the Fed Rate Cut Means for Homebuyers

The Federal Reserve’s half-point rate cut has many people wondering how they’ll be affected. What does it mean for mortgage rates and for homebuyers in general?

Lawrence Yun is the Chief Economist for the National Association of Realtors, and he weighed in on the rate cut. Yun says it is just the beginning of a series of adjustments expected to continue into 2025, with the next cut likely coming after the Presidential election. This move is driven by cooling inflation and slower job growth in recent months.

Mortgage rates, which aren’t directly controlled by the Fed but are influenced by its decisions, have already dropped by 150 basis this year. However, any further declines are expected to be minimal. The high federal budget deficit means large borrowing will limit the available capital for mortgage lending, reducing the impact of future rate cuts.

For homebuyers, the drop in mortgage rates has significantly boosted purchasing power. A buyer with a $2,000 monthly mortgage budget now has about $50,000 more to spend on a home compared to earlier in the year. Those who were previously priced out due to high rates might find themselves back in the market.

It’s a promising shift for buyers, but future Fed cuts may not have as strong an impact due to broader economic factors.

>>More information is available in this Marketwatch wrap up on the Federal Reserve rate hike.

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Russian Invasion May Impact Mortgage Rates

Mortgage rates in the U.S. have risen this year and are expected to continue doing so, but the conflict between Russia and Ukraine could throw a wild card into those projections.
A picture of a 2D wooden house miniature with question marks painted on small wood squares surrounding it.

© takasuu – iStock / Getty Images Plus

The 30-year fixed-rate mortgage climbed by 37 basis points over the first two full weeks of February, according to Freddie Mac. But last week, as Russia invaded Ukraine, rates dropped to 3.89% for the 30-year fixed-rate mortgage.
“When global investors sense increased uncertainty, there is a ‘flight to safety’ in the U.S. Treasury bonds, which causes their prices to go up, and their yield to go down,” says Odeta Kushi, deputy chief economist at First American. “Consequently, amidst heightened uncertainty due to the worsening events in Ukraine, there is a possibility that investors flock to U.S. Treasury bonds, which may result in a temporary, short-term decline in mortgage rates.”
The Federal Reserve has announced it would be raising the funds rate multiple times this year and says it will address this more at its next meeting, March 15 and 16. But how aggressive the Fed is with rates could change, predicts The Mortgage Reports. The Fed’s key rate does not directly affect mortgage rates but can influence them.

Published by the National Association of Realtors.  Source: “How Russia Invading Ukraine Could Impact U.S. Interest Rates,” The Mortgage Reports (March 1, 2022)