Will mortgage rates fall if the Fed cuts rates? You can get one last shot

On November 8, 2024By Littum

A day after Donald Trump’s election victory, investors sent bond yields significantly higher. The “Trump deal” is likely to keep mortgage rates rising, despite the Federal Reserve’s Thursday rate cut, experts say.

That means anyone looking to buy a home or lock in a lower refinance rate will need to grab every chance they get over the next few weeks before prices rise for what could be a while.

“Prices have moved in a direction that suggests investors are bracing for either more inflation or stronger economic growth,” said Danielle Hale, chief economist for Realtor.com. “Regardless, it’s likely, at least in the short term, that mortgage rates will rise.”

The Fed’s quarter-point cut was widely expected by economists. Interest rates on mortgages generally follow the path of the benchmark rate – but not recently. When the Fed met in September, it cut interest rates by 50 basis points. At the time, the 30-year fixed-rate mortgage averaged 6.20%, according to Freddie Mac data. This week it is at 6.79%.

What will mortgage rates do after the election?

Prices aren’t likely to reverse course soon, Bright MLS Chief Economist Lisa Sturtevant said in emailed comments.

“Trump’s fiscal policies can be expected to lead to rising and more unpredictable mortgage rates through the end of this year and into 2025,” she said. “Bond yields rise as investors expect Trump’s proposed fiscal policies to increase the federal deficit and reverse progress in inflation.”

Economists and investors believe Trump’s policies will be inflationary because tax cuts are likely to force the federal government to issue more debt, Sturtevant noted. If that happens, the government will have to pay more to attract investors. His promises to impose tariffs on imported goods will also increase prices.

“A reversal in inflation, which has been declining for most of the past two years, would complicate the Federal Reserve’s rate-cutting decision,” Sturtevant added. “If the Fed holds off on rate cuts, mortgage rates could stay higher for longer.”

Want to lock in a lower rate now?

Nina Gidwaney, head of refinancing and home equity at Chase Home Lending, notes that it’s “almost impossible” for consumers to time the market. “We believe the market has already priced in a 25 basis point rate cut and this is reflected in current mortgage rates,” she said.

But Hale believes anyone looking to lock in a lower mortgage rate, whether buying a home or refinancing a mortgage obtained in the past few years, may have a small window of opportunity in the coming weeks, if anything of Tuesday’s market moves back. “The markets sometimes tend to overreact, and I think some of what we’re seeing now may be an overreaction,” she told USA TODAY.

For anyone who has been trying to buy, the last few weeks of the year can present some opportunities, Hale said. The number of homes listed for sale has risen steadily in recent months, reaching its highest point since before the pandemic in October, according to Realtor.com data. Prices have also dropped a bit, as they often do in autumn. The national median price for a home listed for sale is now the same as a year ago at $424,950.

That could soon change, Sturtevant said. “The housing market was just starting to feel like it was moving more toward balance following the unprecedented effects of a global pandemic and related responses,” she wrote. “The next few months could be a challenging time for potential home buyers.”

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This story has been updated to reflect that Nina Gidwaney is head of refinancing and home equity at Chase Home Lending.

This story has been updated to remove an additional, unintended word.