Rates Reverse: Why More Fed Cuts WON’T Get Us Below 6%
Summary
Mortgage rates are likely to stay in the low to mid sixes through 2025, which may lead to stable home prices and tighter affordability. This is due to the Federal Reserve's recent rate cuts and the persistent risk of inflation. Hosts should be aware of this and how it impacts the housing market, as affordability is a key factor.
Key Insights
- •The Federal Reserve cut interest rates by 25 basis points.
- •Mortgage rates are predicted to stay in the low to mid sixes through 2025.
- •Mortgage rates are tied to the yield on a US treasury and a spread (risk premium) between US treasuries and mortgage rates.
Action Items
- ✓Track inflation data and how it is affecting mortgage rates, as affordability is primarily dictated by mortgage rates.Effort: lowImpact: medium
Common Mistakes
- ⚠Don't assume mortgage rates will drop directly in line with Federal Reserve rate cuts. The relationship is not one-to-one.
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