For months now, the media and our industry have been predicting rate cuts. They’re looking for the magic bullet to get sellers off the sidelines and make homebuying more attractive and affordable, but anyone who bet on those rate cuts in the first half of the year was out of luck. Unlike gravity, what goes up quickly in markets takes much longer to come down. Inflation has also been stubborn and was slow to retreat, hence putting off those predicted rate cuts.

As we ease into September, however, inflation has been steadily decreasing and job growth has slowed, creating a more receptive environment to a Fed Funds rate cut in September. And while we at Key Mortgage don’t have a crystal ball, all signs are pointing to a cut when the Federal Reserve Board of Governors meet Sept 17-18. Whether that is a 25 or 50 basis point cut is unknown, but data received up until this date will help drive that decision.

So, let’s talk about how this upcoming meeting and potential rate cut will impact our collective markets:

• Mortgage rates don’t always move on the announcement. Typically the market that influences mortgage rates anticipates changes in advance, and rates only shift up or down if the announcement differs from what was is expected.

• Mortgage rates do not 100% correlate to Fed Funds rates. As we have discussed previously, the Fed Funds rates are overnight lending rates. Mortgages are in 10 to 30-year durations, so while the Fed Funds rates sets the overall tone for the market, a .25% rate cut does not mean mortgage rates will come down .25%.

• Other factors more closely influence mortgage rates. There is no one factor, but 30-year mortgages are tied more closely to the 10-year treasury bill. Other factors that influence mortgage rates include whether the Treasury Department is buying or selling mortgage-backed securities, where institutional investors allocate their funds, how individual loan servicers or banks price their mortgages and how much they are willing to reduce or adjust their servicing portfolios.

The good news is rates are slowly retreating from their highs of mid-2023 and it appears monetary policy will be put into place that will prevent rates from rising any time soon. While we cannot see into the future, we feel confident in saying rates will not be returning to pandemic-era lows. Consumers waiting for that to happen will be disappointed and potentially miss out on a great opportunity to sell into a high demand/high valuation market.

Having a Key Mortgage loan officer as a partner to help offer education and counsel to both your buyers AND your sellers can be another value add to your portfolio — it could be just the edge you need to get that next listing or engage that next buyer. Let us help YOU earn more business.