For the third meeting in a row, the Federal Reserve cut interest rates—a “hawkish” move in an effort to help a softening labor market. The 0.25% cut brought the interest rate range to 3.5% to 3.75%—but economists and housing experts warn that’s not going to affect mortgage rates in the way potential homebuyers were hoping for.
Chen Zhao, head of economics research at Redfin, wrote in a Wednesday post that the Fed’s December interest rate cut won’t move mortgage rates “because markets have already priced it in.”
The Federal Reserve controls the Federal funds rate, which is a rate that banks charge each other and is more closely tied to credit cards, personal loans, and home-equity lines. A standard 30-year mortgage, on the other hand, is a long-term loan, and the pricing of those loans are tied more closely to yields on longer-term bonds like the 10-year Treasury and mortgage-backed securities.
“Since this rate cut was no surprise, the markets have taken it in stride,” 43-year mortgage industry veteran Melissa Cohn, regional vice president of William Raveis Mortgage, told Fortune. She said more dropping shoes in terms of economic data will be the real turning point: “The future of bond yields and mortgage rates will be determined as new data on jobs and inflation get released.”
