Fed Cuts, Mortgages Climb: Why?
Summary:
The Fed’s half-point interest rate cut last month created widespread expectations of lower mortgage rates, particularly among New York City’s top real estate agents. However, the market has moved in the opposite direction. According to Freddie Mac, the 30-year fixed mortgage rate has actually increased from 6.08% on September 26th to 6.44% in recent weeks, though still below its peak of 7.79% a year ago. Despite improvement from November 2024’s highs, current rates remain too high to motivate many sellers and buyers to enter the market.
?
To understand the current mortgage landscape, I reached out to Sarah Alvarez, Vice-President at William Raveis Mortgage, LLC. She explained that while the Fed can influence mortgage rates, they do not set them. Below are excerpts from our conversation.
Sarah, Are the mortgage rates expected to be better when the Fed lowers the rate again? “While the Fed is always a good indicator for mortgage rates at the end of the day, they are most closely tied to the 10-year treasury which recently is back up around 4%. Most people did not realize that after the most recent Fed rate cut mortgage rates actually jumped up”
Should I wait to buy?
Sarah Alvarez: “As rates come down it is generally expected that prices will go up – so paying a little bit more on your mortgage statement could still net you a ton of upside with increased home value!”
As I wrote in my recent post regarding the Q3 results, prices have come down for the past six quarters. While not great news for potential sellers, it does create a compelling reason for buyers to be more proactive. In Manhattan we have seen the number of signed contracts grow over the past six weeks. If the demand trends continue as expected, prices will increase. You can always change your mortgage rate but you cannot change your purchase price.
When will mortgage rates come down?
Sarah Alvarez: “The general expectation is that over the course of the next 24 months we will continue to see rates come down but it is not a perfect science and at the end of the day if you find the right property and the monthly payments work for you it is always advisable to act immediately because you can do a refi down the road but the same property might not be available and if it is it could potentially be more expensive.”
What is the best way to get a good rate today?
Sarah Alvarez: “In this market where rates can be a bit all over the place depending on which lender you are speaking to, it’s especially important to consult with a mortgage broker who is often compensated by the banks so at no cost is able to shop the entire market to make sure you are getting the best rate and product available. It is also important to keep in mind that while one lender may have the lowest rates, they might not be the fastest bank to work with so it also depends on what your specific priorities are in relation to the transaction and making sure the deal gets done.”
?
In my experience working with buyers over the past two decades, timing becomes critical and a slow bank could cost you money if you have locked in a lower mortgage rate. If you cannot close in time, you could find yourself having to pay a hefty fee to continue your rate lock. In NYC the closing dates are not set in stone as they are in the rest of the country which is why it is so important to work with an experienced, local real estate agent who can help you navigate the process to avoid these unnecessary costs when you are buying.
Are rates expected to be better in 2025?
Sarah Alvarez: “The million-dollar question! That is the outcome everyone is rooting for but it is never a straight ride down. Make sure you are working with someone who is proactive to help you take advantage of any dips in the rate market when you are applying for your mortgage. Rates are cyclical – it is not a question of if rates will come down, but more so when.”
?
Reach out today. As a real estate agent for two decades, I would be happy to guide you to find your home.