Mortgage rates climbed steadily throughout October. This increase wasn't just due to economic data but also the bond market's reaction to the election's likely outcome. Recently, the consensus has been that a greater chance of a Trump victory would likely push rates higher. Bond markets reacted quickly to this prediction.
Even before news outlets confirmed a winner late Tuesday night, 10-year Treasury yields nearly reached 4.5%. This surge wasn't a gamble but the market's built-in response mechanism, reacting faster than traditional news analysis.
Will the Fed's Expected Rate Cut Impact Mortgage Rates?
Today, the market anticipates a 0.25% rate cut from the Federal Reserve. However, long-term rates (like mortgage rates) have already accounted for this expectation. A rate cut is unlikely to move mortgage rates much. Instead, the details in the Fed's policy statement or remarks from Chair Powell may have an effect, but this impact could go in either direction.
In other words, a Fed rate cut doesn't necessarily mean lower mortgage rates. The last rate cut in September demonstrated this disconnect, with mortgage rates rising afterward.
Mortgage Rate Movements
Despite overnight bond market activity, today's mortgage rates didn't rise as sharply as expected. Many lenders did raise rates slightly, but the increase was modest compared to last week.
In Summary
Short-term: Mortgage rates might fluctuate based on the Fed's statements and inflation expectations, but a significant drop due to the rate cut is unlikely.
Long-term: A rate-cut cycle could eventually ease borrowing costs as the economy adjusts to lower growth or inflation pressures.
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