“If we took the worst spread rates from 2023 and compounded those today, mortgage rates would be 0.58% higher than they are now,” Mohtashami wrote. “While we are still far from having an estimate on the spread, the fact that we have seen this improvement is helping this year.”
Mortgage rate movements have been like a roller coaster ride for most of the past year. According to HousingWire’s Mortgage Rates Center, the 30-year consensus rate rose to 7.87% at the end of October 2023 but fell to 6.83% just two months later. More peaks and valleys followed before this year’s high water mark of 7.58% on May 1.
Since the end of July – when the Fed signaled its intention to cut rates – the 30-year yield has fallen from 7.02% and stood at 6.27% as of Friday.
Lender’s opinion
Reaction to the Fed’s rate cut has been muted. Some real estate agents think that the interest rate cut may slow the increase in demand that creates more bidding wars and higher sales prices. And because the Fed’s action was telegraphed early, mortgage lenders and investors had already priced in a reduction in current lending rates.
In a statement published on Wednesday after the decision, Zillow Home Loans Senior Economist Orphe Divounguy said the mortgage payment on a typical house bought today will cost $100 a month less than the one bought in May. Along with being able to stretch their budget further, buyers also have more offers to choose from as Zillow data shows that active listings have increased by 22% in the past year.
But Divounguy also expects an increase in demand, which will not help affordability.
“With lower mortgage rates comes the opportunity for buyers to face more competition than they normally would in the fall, when the market tends to cool,” he wrote. “Lower prices should bring more buyers back into the market than sellers.”
Ryan expressed optimism about buying and refinancing based on consumer behavior in the first few days after the Fed meeting. Even though loan rates didn’t drop immediately, Better has seen an increase in web traffic and lead volume since Wednesday.
“Given our technology and the way people make financial decisions now, there’s a fair amount of people starting to get out there,” Ryan said.
“If you have a store, you need people to come into the store and browse. Not everyone will buy, but if no one comes into the store, I can tell you that your sales are zero. If 100 people enter your store, it doesn’t mean your sales are 100, but actually people come to the store and I think you get more people who re-engage in the market. “
While fears of a US recession have long been circulating, the fact that inflation is approaching the Fed’s target of 2% per year makes the story less salient. Policymakers appear to be focusing more on the labor market, which has cooled of late, but Ryan said “we are still at full employment as an economy” and “the employment picture is pretty good by historical standards.”
On the question of whether the Fed’s policy has been too restrictive, Ryan admitted that rate cuts would be welcomed sooner rather than later.
“Yes, they’re a little late, maybe on both ends – it’s too late to go and now it’s too late to cut,” he said. “We are biased; we are in the real estate industry. These high rates and lack of supply have hampered us as an industry. But all that being said, with your tax payer/citizen hat on, they did a great job in a very difficult situation.”
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