The Truth Behind Mortgage Rates

By Arizona Home Group

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Did we see a drop in interest rates after the Fed rate cut? Not exactly. Here’s what happened: Last September 18, the Fed announced a half-point rate cut, but many were let down when housing interest rates did not drop as expected.

Looking back, mortgage rates had been steadily declining from April until a few weeks before the Fed’s announcement. It was hard to see this steady decline because we had a very slow summer. As of now, the 30-year fixed mortgage rate is just above 6%, but our preferred lenders are locking people in the high fives.

The reality is the Federal Reserve’s rate cuts do not directly affect mortgage interest rates. Instead, mortgage rates are directly affected by the stock and bond markets. Let me explain:

Mortgage rates often move in the opposite direction of the stock and bond markets. When stocks are strong, bonds typically weaken, pushing mortgage rates up. Conversely, when stocks are down, bonds often strengthen, lowering mortgage rates.

What effect do Fed rate cuts have, then? When the Federal Reserve cuts rate, it directly affects short-term rates. This includes rates for credit cards, car loans, and home equity lines of credit.

The bottom line is that both long-term and short-term interest rates have been trending downward because the government sees that inflation is more manageable now. This is good for consumers. We’ve noticed an uptick in pending home sales over the past six weeks and expect it to continue until the fall season.

If you’ve been thinking about buying a home, talk to your lender now and ask them about their interest rate, or if you need someone to help you get pre-qualified, we can connect you with one of our trusted lenders. They will tell you your interest rate and monthly payments based on your income and credit score.

Feel free to contact us if you have any questions or need help. Our contact details are (602) 571-3730 and john@arizonahomegroup.com. We’re always here to help.