I see a lot of people posting that they are anxiously awaiting the Feds rate cut later this month, often stating that they are delaying their purchase plans until then.
That’s not how it works.
The Fed only has direct control over the overnight (1 day) interest rate. Mortgage rates are driven largely by the 10y treasury rate which is determined by the market. Investors cause the 10y to fluctuating based on the current expectations for future interest rates. Rates fluctuate based on what the feds statements are NOW months before any actual rate cuts are implemented.
If you bring up the 10y treasury and 30yr mortgage graphs on the St Louis Fed website, you can clearly see that both track very closely together and are already down nearly 1% since the most recent peak in May.
The cut later this month is already baked in. They could decrease a little more if the cut is .5%, but could actually rise a little if the Fed only cuts .25%.
So make your decisions based on what is actually happening with mortgage rates, NOT the feds execution of their cuts to short term rates.
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That’s interesting your friends are waiting for rates to lower. All of my friends and myself are like it’s great if rates lower, but moot unless home prices lower too.
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Most of my peers are only looking at the monthly payment amount.
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yeah, that’s why I’m scratching my head why people are still buying by us. The buy-rent discrepancy is so big by us, that even a 50% down payment won’t get you an equivalent mortgage payment to rent.
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Worry less, As long as they can afford the monthly payment, they can say they are home “owners”… nothing has changed since 2008. The bank owns their home and they overbought an asset/bad debt that the federal reserve has now proven time and time again they will insure at all costs, including asset inflation. Thats my rant lol. These people aren’t affording $700k homes. They are stretching thin to afford a 5% down payment on a $700k home and maxing out to struggle on the monthly payment
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It’s definitely not a pointless discussion because interest rates really affect your payments, which is super important for anyone getting a loan.
Right now, the housing market is pretty flat, so houses are just sitting around. If you’re looking for lower prices, now’s the time to pounce! Make some lowball offers, and you might score a better deal!
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Absolutely! If everyone knew where rates were headed, they’d just invest all their savings and down payments based on that. But the truth is, no one really knows. Mortgage-backed securities are traded every day, just like other investments, and they reflect the latest info. In fact, it’s possible for mortgage rates to actually go up on the same day the Fed cuts rates. If the market thinks there won’t be many more cuts or that the Fed isn’t being super friendly with rates, they could raise rates right then and there.
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It’s a bit more complicated than just the federal funds rate. We’re really talking about Treasury yields, especially the ten-year ones. These yields are affected by a lot of factors beyond just the fed funds rate, like future expectations that others have mentioned. The strength of the JPY against the USD also plays a role in impacting Treasury yields, especially until the Bank of Japan gets its rates sorted out. Maybe Yellen will propose a USD/JPY swap line to prevent any chaos in the U.S. Treasury market as the BOJ starts selling off U.S. Treasuries to help the JPY. Either way, this would boost the availability of credit in USD and could lead to lower mortgage rates.
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The “cheapness” of money really depends on the fed funds rate, and mortgage rates tend to follow that trend. When the fed funds rates go down, mortgage rates will definitely drop too. Real estate prices are a whole different issue, but if someone says mortgage rates won’t drop in the next year, they really don’t know what they’re talking about.
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