On September 18, 2024, the Federal Reserve cut interest rates by 0.5%, bringing the Fed Funds Rate to around 4.875%. This rate affects short-term loans like credit cards and car loans but has an indirect impact on mortgage rates. The prime rate went from 8.5% to 8.0%.

Because of this rate cut, the difference between short-term and long-term interest rates (the yield curve) will increase, making longer-term loans more appealing. Adjustable Rate Mortgages (ARMs) may become more attractive as well.

Mortgage rates can be influenced by how people perceive the economy. Sometimes, rate cuts can lead to higher mortgage rates due to inflation concerns. However, in this case, the Fed has been strict with rates for a while, and inflation seems under control, so further cuts could help the economy without causing high inflation.

The Fed has hinted at more rate cuts in the near future, expecting inflation to drop further, which could benefit mortgage rates. If the economy slows down, mortgage rates might fall even more. Key Takeaway: The Fed’s recent rate cut is significant, but future cuts might be smaller. If unemployment rises above 4.5%, the Fed might cut rates more aggressively. Overall, mortgage rates are likely to decrease, though not in a straight path.

Here is a great article to share with your clients
https://www.mortgagenewsdaily.com/markets/mortgage-rates-09182024