The Fed just aggressively cut rates by 1/2%, bringing the Fed Funds Rate down to 4 7/8%. The Fed is also forecasting another 1/2% cut by the end of this year, and an additional 1% cut in 2025. It should be noted that these forecasts may change, in either direction, as economic data presents itself. The Fed is trying to ease interest rates to keep the economy from entering a recession.

Does that mean that mortgage rates went down by 1/2%? If you’ve been reading my updates you know that is not the case! In fact we have seen rates tick up a bit after the Fed cut rates. Why is that? Most likely it has to do with what’s called “buy the rumor sell the news.” Think of it this way, lets say there is a movie coming out and it’s getting all this buzz. It’s the next masterpiece by (insert favorite director here). When the movie does come out expectations are sky high right? Then when people actually see it some may be disappointed that it didn’t live up to their lofty expectations. That is likely what we are seeing with rates, the hype exceeded expectations. Not to mention that only a few months ago rates were in the 7’s and they have come down, almost in a straight line, down to the low 6’s and high 5’s. It is normal to see some give back when rates make that kind of move in either direction.

However, it still doesn’t change the narrative that rates should be expected to stay steady or keep going down bit by bit. A lot is being priced in at the moment so I don’t think we will see big movements like what we’ve been seeing over the last few months. The next Fed meeting is the day after the election (that should be fun!). As mentioned at the top, since they did the 1/2% cut up front we are probably looking at a 1/4% cut in November and December.

Recap:

-Fed cut rates by 1/2% on Wednesday

-Rates actually increased slightly off of the news

-Likely a 1/4% cut in November and December with additional cuts next year