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High mortgage rates Housing market conditions have put a strain on buyers and homeowners looking to refinance, but relief may be in sight.
Financial experts expect the Federal Reserve to will reduce the federal funds rate in September, the first rate cut of 2024. The impact of the Fed rate on mortgage rates may not be immediate, as markets have likely already priced in this expected cut. Nevertheless, this measure could lead to lower mortgage rates in the coming months.
But how far can they go and what consequences will this have on your real estate purchase or refinancing plans? Let’s find out.
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Here’s How Far Mortgage Rates Could Fall After the September Fed Meeting
Josh Green, head of mortgage lending at Barrett Financial, believes there is a “100% chance” of a federal funds rate cut, but its impact may vary.
“If Powell [indicates] the economy is weaker than expected or they are considering a deeper cut, [mortgage] rates [might] “Prices will come down even further as they incorporate these future discounts,” Green says.
Assuming the Fed achieves a soft landing – which is historically rare but plausible – Green believes rates could fluctuate around 6% for a while. In the long term, they could potentially fall into the 4.5 to 5.5% range.
Loan Depot sales director Debbie Calixto warns that we may not see substantial cuts until the November Fed meeting.
“If there is confidence in another rate cut in November…we could see another drop in mortgage rates. [possibly] in October,” Calixto said.
Learn more about the best mortgage rates available to you here.
Factors influencing rate reductions
According to Steve Hill, mortgage broker at SBC Lending, several factors influence whether mortgage rates will go down (or not):
- Economy: A strong economy generally leads to higher mortgage rateswhile a weakening economy often translates into lower rates.
- Jobs: High employment can lead to higher mortgage rates, but higher unemployment can lead to lower rates.
- Inflation: Lower inflation rates often allow for mortgage rate reductions, while high inflation tends to keep rates high.
- Election: Political uncertainty can cause mortgage rates to fluctuate, and potential policy changes can affect market expectations.
- World Events: Geopolitical tensions can influence rates (for example, conflicts that increase oil prices could keep inflation high, preventing rate cuts).
What this means for homebuyers and refinancers
Acting now could mean less competition and more equity growth potentialOn the other hand, waiting could lead to lower rates but increased demand for housing.
Your decision depends on your financial situation and your specific goals.
Should you buy a house now?
Buy a house Now, even with higher rates, it can be advantageous.
“We [currently] have a low supply of housing… When interest rates fall, [we expect] “an influx of impatient buyers,” Calixto explains.
This increased demand (and the lack of inventory to support it) could to raise real estate prices — which could offset the benefits of waiting for lower rates.
Calixto shares his experience helping a couple buy their first home with an FHA loan nine months ago. Interest rates were high then, Calixto says, around 7%. But they’re now refinancing to save more than $400 a month. Plus, their home’s value has increased significantly in that short time.
This scenario shows how acting now can lead to rapid equity gains and create opportunities to benefit from future rate cuts through refinancing.
When would it be wise to wait?
While acting now may be beneficial for some, waiting may be wiser for others. For example, Green suggests that pursue a mortgage refinance It may be a little early for some owners.
“There may not be much benefit unless you bought last year and have a rate close to 8% or a VA loan,” Green says.
However, he warns against waiting. Also long, even if you think rates will go down further.
“[A gentleman I know of through a colleague has been holding out for the ultimate bottom]but in doing so, he loses $800 a month in savings,” he says. This scenario shows that waiting without a smart strategy can cost you money in the long run.
Instead, Green recommends a balanced approach. It may be worth refinancing now if you can save at least $300 a month. With some types of loans, like VA loans, you can easily refinance again after a short period of time if rates continue to drop.
The essentials
Mortgage rates could fall after the Fed’s September meeting, but no one knows exactly when or by how much. That’s why experts caution against trying to time the market.
“Assess future movements in mortgage rates and wait with hope [that] rates will drop and may be delayed [your] “You don’t have the ability to start creating wealth,” Calixto warns. Instead, make decisions based on your current situation and what will benefit you most in the present.
If you are in the preparation phaseTalk to multiple mortgage lenders. They can help you understand your options and develop a solid plan. During these discussions, look for a rate that is significantly lower than your current rate or lower than recent averages. As a general rule, a decrease of 0.75% or more is worth considering.
