The Federal Reserve’s recent rate cut, while anticipated, doesn’t automatically translate into lower mortgage rates. Mortgage rates are complex and are influenced by several factors, including the 10-year Treasury yield, investors’ expectations about the economy, and inflation. This means that even with the Fed signaling further rate cuts, mortgage rates could still rise if inflation increases or economic conditions change.
The housing market has been sluggish since mortgage rates began rising in 2022. Lower rates can increase buyer purchasing power, but high home prices continue to pose an affordability challenge. To significantly improve affordability, the housing market needs to see further drops in mortgage rates combined with slower home price growth or even price declines.
For potential homebuyers, trying to time the market can be risky. If they can afford to buy at current rates and find a suitable property, it may be better to proceed rather than waiting for potentially lower rates. Homeowners looking to refinance might consider doing so if they can reduce their current rate by at least one percentage point.
