The rate guessing game has been on somewhat of a seesaw over these past several months. Some see rates moving lower while others don’t see it that way. Recent Fed announcements indicate rate cutting is likely not in the foreseeable future. Why? Because inflation just won’t seem to go away. While the rate increase has slowed, it’s still above where the Fed wants it to be.
The Fed doesn’t directly impact your mortgage rate, but it does affect the mindset of creditors. The strategy, or so-called strategy, is that higher rates will slow down a booming economy and when the economy appears to falter, rates will fall. The Fed doesn’t adjust your mortgage rate, but it does directly affect the Federal Funds rate. This is the rate banks can charge one another for short-term lending. Short term as in overnight. Banks have to meet certain reserve amounts and when that reserve gets a little too low, banks can borrow from each other or directly from the Fed. This rate is what the Fed controls.
But even after several rate moves in 0.25% increments, the economy is still in somewhat of a standstill. It’s growing, but very little. At the same time, interest rates have fallen over the past couple of years or so but the Fed now is sitting on its hands. It wants to lower rates in general to help the economy move along but inflation is still an issue.
For those who are waiting for rates to move a little lower to either qualify for a new mortgage or to refinance and existing loan, don’t get too excited about any rate cuts, at least in the near future. The Fed wants to keep less money in the hands of consumers to help keep prices down. When consumers have lots of cash in the bank, the tendency is to go and spend it on something.
The view from this desk is that mortgage rates will remain in their current range for the time being. Rates don’t look like they’ll go lower anytime soon but at the same time it doesn’t appear rates will be on the rise, either. If you’re waiting for rates to move lower, for whatever reason, you might very well be waiting a while. On the other hand, it doesn’t look like rates will rise. That means if you’re waiting on rates, you might very well lock in that rate right now. The downside could very well keep you out of the house you really want.
