Weekly Mortgage Rate Update- 09-18-2024
I postponed doing this week’s update a day so we could recap the Fed meeting that just ended. This one was significant because it marks the first rate cut since March 2020. It also was a true live meeting with the market torn between a 50 or 25bps cut.
The Fed opted for the 50 bps cut. The larger than usual move was framed by Powell during his speech and Q&A that followed as“ The US economy is in a good place- we want to keep it there” and commenting “The 50 bps move was a commitment to make sure we don’t fall behind” A 50 bps cut is an aggressive move. The last 2 times the Fed cut 50bps at a meeting, a recession followed. So its hard to see how that translates to the “everything’s fine” narrative presented today.
On the mortgage side of things, the actual Fed rate has less of a direct impact on our rates, but the economic projections are something we were awaiting for forward guidance. We last saw the projections in June and the tune has changed since then.
The new economic projections courtesy of Rate Alert show:
- The Fed median dots dropped- 2024's median rate projection slashed from 5.125% to 4.375%, 2025 cut from 4.125% to 3.375%, and 2026 from 3.125% to 2.875%.
- Unemployment rate expected to rise to 4.4% by year end
- Inflation Core PCE expected to be lower at 2.3% by year end and 2.1% by 2025 year end
Powell took the opportunity to tamper future rate expectations-“ It feels to me the neutral rate is probably significantly higher than it was back then” (before pandemic) The neutral rate is where the Fed wants to be. Meaning not too restrictive or accommodative towards the economy. Remember prior to the pandemic the Fed rate was at or near zero for over a decade. Now the 2026 forecast shows 2.875%. Based on this you could expect ALL rates to be higher than pre-pandemic rates, at least for the foreseeable future.
This is why we say the Fed rate is not the mortgage rate- Mortgage rates are currently neutral with very little movement today. CNBC observed that the bond market is concerned that this large of a cut will reignite the economy and/or inflation. Bonds move completely different than you might expect, especially longer dated bonds like mortgage rates. Today is a perfect example of that.
At market close today, rates are still well within the 5’s. It may take a few days for the market to really digest today.
|
Loan Type |
Conventional 30 year |
Conventional 15 year |
FHA 30 year |
VA 30 Year |
|
Interest rate |
5.625% |
5.375% |
5.125% |
5.25% |
|
APR |
5.98%* |
5.63%* |
6.13%** |
5.39%*** |
LICENSED BY THE CALIFORNIA DEPARTMENT OF REAL ESTATE LICENSE A division of TYKY (DRE #01919683) (NMLS LICENSE #257773)
RATES ARE CURRENT AS OF 09-18-2024. SUBJECT TO BORROWER APPROVAL, FICO SCORE, LTV AND PROPERTY TYPE
*APR IS BASED ON ESTIMATED FINANCE CHARGES OF $6935
**APR IS BASED ON ESTIMATED FINANCE CHARGS OF $10,969 THIS INCLUDES FHA MORTGAGE INSURA
NCE PREMIUM
***APR BASED ON ESTIMATED FINANCE CHARGES OF $8343
FEES INCLUDE 1% POINTS, NO Loan Origination Fee , $1095 PROCESSING AND $0 UNDERWRITING FEE
* Specific loan program availability and requirements may vary. Please get in touch with your mortgage advisor for more information.