Claman Countdown panelists Jeff Sica and Dutch Masters predict Fed Chairman Jerome Powell's next move.
Americans watched mortgage rates soar during the Federal Reserve's aggressive anti-inflation policies, after the central bank finally cut the federal funds rate for the first time in four years last month. , many people have come to expect interest rate deferral.
But instead of falling, mortgage rates have been rising for the past three weeks, with the benchmark 30-year fixed rate rising to 6.44% in Freddie Mac's latest reading.
Mortgage rates spiked in 2022 and 2023 as the Fed hiked rates. In just 16 months, the central bank has approved 11 interest rate hikes, the fastest pace of tightening since the 1980s.
Although the federal funds rate is not paid directly by consumers, it does affect the cost of borrowing, such as mortgages, auto loans, and mortgages. credit card.
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“Fixed mortgage rates move in conjunction with long-term interest rates, such as the 10-year Treasury yield, both of which react to the outlook for economic growth and inflation in the coming years,” said Greg McBride, chief financial analyst at Bankrate. ” he said. fox business. “Mortgage rates tend to move well in advance of actions the Federal Reserve takes on short-term interest rates, rather than reacting to them.”
A sign posted in front of a home for sale in San Rafael, California on August 7, 2024. Mortgage interest rates rose for the third consecutive week. (Justin Sullivan/Getty Images/Getty Images)
McBride pointed out that mortgage rates fell completely from 7.2% to 6.2% from May to September in anticipation of a Fed rate cut.
“The Fed's more aggressive half-point rate cut in September increases the likelihood that the economy will continue to grow, avoid recession, and that inflation will be higher than expected,” he said. “With this outlook, long-term interest rates (both Treasury yields and mortgage rates) rose, reversing some of the decline seen last month.”
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McBride added that even now, mortgage rates have only returned to mid-August levels and remain significantly lower than they were as recently as May.
A “For Sale” sign is posted in front of a home in Patchogue, New York, on June 1, 2024. (Steve Forst/Newsday RM via Getty Images/Getty Images)
Regarding the recent rate hikes, Hannah Jones, senior economic research analyst at Realtor.com, said the latest employment and inflation data were both better than expected, putting upward pressure on mortgage rates. did.
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“Interest rates have been quite volatile recently and are likely to continue to do so in the coming weeks as the market digests upcoming PCE inflation and October employment data,” Jones told FOX Business. Ta. “Overall, we expect long-term mortgage rates to continue trending downward.”
