“This represents a 50-basis point improvement, which could stimulate some increased activity in the housing market,” he said.
Melissa Cohn, regional vice president at William Raveis Mortgage, pointed out the risk of a recession if the Fed cuts rates too aggressively.
“We’re still at a very high level. Mortgage rates bottomed at 3%. I don’t believe that we’re ever going to get back to 3%,” Cohn said. “The rates are going to come down an eighth of a point at a time, the same way that the Fed is only going to cut rates a quarter point at a time, probably. So, it’s a little bit of a slow drip.”
Cohn also noted that mortgage rates are more closely tied to the bond market and inflation rates than to the Federal funds rate.
“People also need to remember that […] mortgage rates aren’t going to change based on a Fed cut. Your home equity rate will drop,” she said. “Your student loans, car loans, all those rates will drop every time the Fed cuts rates, but mortgage rates are tied to the bond market, and the bond market is more affiliated with the rate of inflation and bad economic data than it is to the Fed funds rate.
Source: mpamag.com