Act Fast: Last Chance to Secure a Lower Mortgage Rate After Fed Cut!

The day after Donald Trump clinched the presidency, the reaction from investors was to drive bond yields significantly higher. This surge, often referred to as the “Trump trade,” is expected to continue pushing up home loan rates, regardless of the Federal Reserve’s upcoming decision this Thursday on whether to reduce a crucial interest rate, according to industry experts.

This situation suggests that prospective homebuyers or those looking to refinance at a lower rate should act quickly in the forthcoming weeks before rates potentially escalate further.

“The direction of rate movements indicates that investors are bracing for either increased inflation or more robust economic growth,” explained Danielle Hale, chief economist at Realtor.com. “In the short term, it appears mortgage rates are set to rise,” she added.

While the Federal Reserve is widely anticipated to announce a 25 basis point cut, mortgage rates have recently shown a tendency to not strictly follow the Fed’s benchmark rate. For instance, despite the Fed’s 50 basis point reduction in September, the average rate for a 30-year fixed mortgage was 6.20% around that time, per Freddie Mac. Fast forward to last week, and it climbed to over 6.72%. Freddie Mac is set to release the latest weekly rates this Thursday morning.

Future Trends in Mortgage Rates After the Election

“It’s unlikely that we’ll see a reversal in rate trends anytime soon,” commented Lisa Sturtevant, Chief Economist at Bright MLS, via email.

Sturtevant predicts that “Trump’s fiscal policies will probably lead to higher, more volatile mortgage rates through the end of this year and well into 2025.” She explains that bond yields are climbing because investors anticipate that Trump’s proposed fiscal policies will expand the federal deficit and hinder progress on controlling inflation.

Economists and market watchers argue that Trump’s policies could fuel inflation, as tax reductions may necessitate increased federal borrowing, thereby raising the government’s borrowing costs. Additionally, Trump’s proposed tariffs on imports are likely to push up prices further.

“A reversal in the recent downtrend in inflation could make the Federal Reserve’s decision on rate cuts more complicated,” Sturtevant added. “If the Fed decides against rate cuts, we might see persistently higher mortgage rates.”

Is Now the Time to Secure a Lower Rate?

According to Nina Gidwaney, head of refinance and home equity at Chase Home Lending First, timing the market is “nearly impossible” for consumers. “We believe that a 25-basis point rate cut by the Fed has already been factored into the current mortgage rates,” she stated.

For those in the market to buy, the last few weeks of the year might present some opportunities, Hale noted. The inventory of homes for sale has been rising steadily for several months, reaching pre-pandemic levels in October, according to Realtor.com. Additionally, home prices have seen a slight decline, typical of the fall season. The median national price for homes currently listed is now at $424,950, unchanged from last year.

This situation may soon change, warned Sturtevant. “The housing market was just starting to move towards a balance after the significant impacts of the global pandemic,” she observed. “The coming months could prove difficult for potential homebuyers.”