Published November 1, 2024
Mortgage Interest Rates on the Rise Despite the Federal Reserve Cutting Rates
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As we approach one of the most anticipated elections in recent history, mortgage interest rates are climbing, despite recent rate cuts from the Federal Reserve. This divergence between Fed policy and mortgage rates can be confusing, so let’s break down what’s driving this trend.
1. The Election’s Influence on Mortgage Rates
Even without major economic events last week, mortgage rates climbed. Why? It’s all about the uncertainty surrounding the upcoming election. Beyond choosing a president, this election will decide control of Congress, which has a big impact on future government spending. Both major parties have proposed plans that could add to the national deficit, depending on who gains control. This makes the bond market—and in turn, mortgage rates—nervous, as it anticipates how these policies could impact the economy and national debt.
2. Why the Bond Market Matters More Than the Fed Right Now
The Federal Reserve recently cut its rate, but mortgage rates have continued to rise because they are closely tied to the bond market. Recently, there’s been a drop in demand for U.S. debt, including shorter-term bonds like the 2-year and 5-year Treasuries. When bond demand falls, yields go up, which often pushes mortgage rates higher as well. This shows that mortgage rates are currently more sensitive to the bond market than to the Fed’s actions.
3. Upcoming Economic News and Its Impact on Rates
This week, several major economic reports—like third-quarter GDP, inflation data, and job statistics—are due. In a normal week, weaker economic news could help bring mortgage rates down. However, with the election right around the corner, the effect might be limited. The bond market is more focused on the election results, which will likely have a bigger impact on mortgage rates than the upcoming data.
4. Is It a Good Time to Lock In a Rate?
From a technical standpoint, mortgage rates are in a bit of a “no man’s land” with no strong indicators of where they might go next. With significant events like the election and more and more economic news ahead, locking in a rate now could be wise, as rates might stay unpredictable in the short term.
What’s Next?
In short, mortgage rates are rising right now because the bond market is looking ahead to the election and possible changes in government spending, which could impact the economy long-term. After the election, rates may settle a bit based on the outcome and market reactions. Until then, stay informed, and if you’re considering a mortgage or refinance, keep a close eye on rates in the weeks to come!
Stay tuned as the Federal Reserve meets again on November 6th and 7th right after the election. Call us for an update!
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