- Mortgage rates hit a three-year low on Wednesday prior to the Federal Reserve's rate cut.
- Despite the anticipated rate cut, Zions Bank mortgage manager Jeremy Holmgren said mortgage rates won't change much.
- Fed Chair Jerome Powell noted housing is sensitive to rate changes, and future cuts may also lower mortgage rates.
SALT LAKE CITY — Mortgage rates just hit a three-year low, but it's not yet clear whether that decline will continue now that the Federal Reserve's benchmark interest rate has been cut by a quarter percentage point, as expected.
Before Wednesday's midday announcement by the Fed, Mortgage News Daily posted a 6.13% rate for a 30-year fixed-rate mortgage, falling 0.12 percentage points from the previous daily index to the lowest rate since late 2022.
That number crept up to 6.22% later Wednesday, a 0.09 percentage point increase.
The weekly average for a 30-year fixed-rate mortgage was down to 6.35% as of Sept. 11, the biggest weekly drop in the past year, according to the Federal Home Loan Mortgage Corporation, better known as Freddie Mac.
The recent reduction in mortgage rates, which had risen to more than 7% at the start of the year, has been widely seen as already reflecting the cut signaled in late August by the embattled Fed chairman Jerome Powell.
Zions Bank mortgage manager Jeremy Holmgren said rates aren't going to move much because of Wednesday's cut.
"The reason is simple: The market already anticipated this cut, and lenders priced it into mortgage rates over the past couple of weeks. That's why we saw improvements before today, not after," Holmgren said.
But that doesn't mean mortgage rates couldn't go lower.
"If the Fed follows through with two more rate cuts this year, there's room for mortgage rates to improve further — though, again, the biggest moves may happen before each announcement as markets build in expectations," he said.
Holmgren said he expects mortgage rates to continue to fall "slowly but surely."
Still, he advised homebuyers not to hold out for lower rates.
"If they wait to buy when everyone else wants to buy, there will be more competition and they might not get the house they want," said Holmgren, who also has warned that increased competition could drive "home prices higher. In the end, waiting could actually cost you more."
The Fed's action in lowering the interest rate that banks charge one another for short-term loans does not directly impact mortgage rates that track the yields on 10-year Treasury bonds, influenced by inflation, job growth and other economic factors.
Powell told reporters Wednesday that housing is sensitive to interest rate changes.
"When the (COVID-19) pandemic hit and we cut rates to zero, housing companies were incredibly grateful, and they said that was the only thing that kept them going was that we cut so aggressively," he said.
"The other side of that is when inflation gets high and we raise rates ... it does burden the housing industry," Powell said, adding that "we don't set mortgage rates, but our policy rate changes do tend to affect mortgage rates, and that has been happening."
Rate cuts will help raise demand and reduce borrowing costs for builders, he said, although "most analysts think there would have to be pretty big changes in rates to matter a lot to the housing sector."
Mortgage News Daily's Matthew Graham had pointed out earlier this week that "rates were doing the same thing for the same reasons" ahead of the September 2024 Fed meeting, where an interest rate cut was also expected.
"Back then, mortgage rates moved paradoxically higher after the Fed rate cut," Graham was quoted as saying by CNBC. "The same thing could happen this time, but it's by no means guaranteed."
Contributing: Art Raymond
