Why Mortgage Rates Don’t Follow Fed Cuts

Stop waiting to buy – Fed cuts don’t guarantee lower mortgage rates. By the time the Fed cuts rates, mortgage rates have often already shifted, leaving you paying for more.

Many people believe the best course of action is to sit tight until the Federal Reserve cuts rates. On the surface, that makes sense, but in reality, it’s one of the biggest myths in real estate. Waiting on the Fed can actually cost you thousands because mortgage rates usually move before the Fed makes a change. By the time you hear the news, the best window of opportunity is often already gone.

Why do mortgage rates move differently? When the Fed lowered its benchmark rate by 0.25% recently, most people expected mortgage rates to follow. Instead, they went up a little. That’s because mortgage rates are tied to the bond market, not directly to the Fed. The bond market responds to factors such as job growth, inflation, and the overall economic health. A few weeks ago, when job numbers dropped, mortgage rates fell immediately, before the Fed even intervened. This illustrates why waiting for an official announcement is ineffective.

"Jobs, inflation, and the bond market are the fundamental drivers of mortgage interest rates, not the Fed.”

The risk of waiting. Currently, buyers are securing mortgages at rates around 6.125%. If rates dip into the 5s, it’ll create a rush of activity. When that happens, more buyers will flood the market, demand will spike, and home prices will climb. If you wait until you see the headline, you’ll be competing with everyone else who waited too, and the deals will be harder to find. It’s also important to note that ultra-low rates, such as the 3% range we saw a few years ago, aren’t sustainable in the long term. Those numbers typically indicate that the economy is struggling. A stable, strong housing market is supported when mortgage rates are in the 5% to 6% range, and that’s precisely where things are heading.

How to prepare? If you’re thinking about buying, selling, or investing, the best strategy is to pay attention to mortgage rates and economic signals, not the Fed’s schedule. Working with an experienced agent and a strong lender gives you the ability to act quickly when opportunities show up, instead of reacting after they’ve already passed.

Buying or selling a home shouldn’t feel like a gamble. With the proper guidance, you can make informed decisions, secure a reasonable rate, and achieve the results you want. If you’re ready to discuss your options and maximize the benefits of today’s market, feel free to call us at 615-315-9223 or email us at fykesrealtygroup.com. We’d be happy to help you determine the best plan for your situation.