Mortgage rates Plunge to Lowest โฃLevel since Late โ2022 Amid Anticipation of Federal Reserve Rate cut
Mortgage rates โฃexperiencedโ a important decline Tuesday,โค driven by investor activity in teh mortgage-backed bond market as a โFederal Reserve rate cut looms. โThe average rate for a 30-year fixed mortgage fell 12โ basis points โฃto 6.13%, reaching its lowest point since late 2022, according to Mortgage โNews Daily.
Matthew Graham, chief operating officerโฃ of Mortgageโค News Daily, noted the current market setup mirrors conditions seen in โSeptember 2024, when โฃrates similarly decreased ahead of a Fed meetingโข widely expected to result โin a rate cut. Though, he cautioned that โratesโ paradoxically โincreasedโฃ following โthe Fed’s โrate cut last September, a scenario that could repeat itself,โ though it is indeed not guaranteed.
The drop aligns with historical patterns, as โคexplained by willy Walker,โข CEO of Walker &โ Dunlop, in a recentโ CNBC Property Play podcast. Analyzing Fed rate cut periods since 1980, Walker observed that cuts during recessionary environments typically lower long-term rates, including the 10-year and โ5-year Treasury yields. Though, โcutsโค outside of recessionary โขperiods have less impact on long-term rates.
“If you go back โto 1980 and the nine Fed rate cut โperiods over that 45-year period, the ones were the Fed cuts in a recessionary surroundingsโ end up pulling downโ the long end ofโ the curve, pull down the 10-year,โค pull down the 5-year,” Walker โsaid. “In those where it’s not a recession, which is โlike right now, itโฃ does not impact long-term rates.”
Walker anticipates at least a 25 basis point cut,potentially followed โคby another,but believes the impact on long-term rates will be limited. โฃHe suggests a “buy onโฃ the rumor, sell on the news” dynamic, predicting a potential sell-off in the 10-year Treasury yield after โคthe Fed’s announcement. “I think you probably see the 10-year sell offโข a littleโ bit after the Fed actually announces their 25 basis โpoint cut,” Walker stated,โค adding that current yields โmight potentially be lower than where thay will be in two to three weeks.