Will the Federal Reserve's rate cut lower my mortgage payment?

The Federal Reserve's recent 0.25% rate cut is unlikely to significantly lower your mortgage payment, as mortgage rates are tied to long-term bond yields, not directly to the Fed's policy rate.

What is the current mortgage rate in the US?

As of the article's reporting, the current mortgage rate is approximately 6.3%, down from an October 2023 peak of 8% but higher than pandemic-era rates.

Why is housing affordability still a problem despite Fed rate cuts?

Housing affordability remains a challenge primarily due to home prices, which have increased by over 50% since 2020, in addition to mortgage interest rates.

Home / Business and Economy / Fed Rate Cut: Why Mortgage Rates Won't Budge

Fed Rate Cut: Why Mortgage Rates Won't Budge

13 Dec

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Summary

Federal Reserve's rate cut of 0.25% to 3.5%-3.75% won't impact mortgage rates.
Markets have already priced in the Fed's expected interest rate reduction.
Home prices, not just mortgage rates, are the primary driver of affordability crisis.

Fed Rate Cut: Why Mortgage Rates Won't Budge

The Federal Reserve has enacted its third consecutive interest rate reduction, lowering the federal funds rate by 0.25% to a range of 3.5% to 3.75%. This move, aimed at supporting a softening labor market, is unlikely to influence mortgage rates as financial markets had already factored in the change. Experts note that mortgage rates are more closely tied to longer-term bond yields, which respond to new economic data concerning jobs and inflation, rather than the Fed's short-term policy adjustments.

While the Fed's cut aims to stimulate the economy, its direct impact on prospective homebuyers' borrowing costs is minimal. Current mortgage rates hover around 6.3%, a significant increase from pandemic-era lows but down from the 8% peak of October 2023. Projections suggest the Fed may hold rates steady for the near future, with inflation at 3% and a weakening labor market.