The Fed Doesn’t Set Your Mortgage Rate. So Who Does?
The Fed Doesn’t Set Your Mortgage Rate. So Who Does?
Sometimes Mortgage Rates Move Before the Fed Does
Every time the Federal Reserve meets, I start hearing some version of:
“So mortgage rates are going down now, right?”
Maybe.
Maybe not.
Because one of the biggest misconceptions I hear from buyers and
sellers is that the Fed sets mortgage rates.
It doesn’t.
The Federal Reserve sets a short-term benchmark called the federal
funds rate. Your 30-year mortgage rate is influenced by a much bigger
mix of things, including the bond market, mortgage-backed securities,
inflation, economic data and what investors think is coming next.
That’s why you can turn on the news, hear that the Fed lowered rates
and then wonder why mortgage rates didn’t drop right along with it.
They don’t move in lockstep.
Sometimes Mortgage Rates Move Before the Fed Does
Financial markets are constantly trying to figure out what’s coming next.
If investors expect inflation to cool, the economy to slow or the Fed
to change direction, mortgage rates may start reacting before the Fed
ever makes an announcement.
The opposite can happen too.
That’s why I don’t love the idea of making a six-figure housing
decision based on what we think the Fed might do at its next meeting.
There are too many other pieces in play.
I Care About YOUR Rate
If you’re thinking about buying a home, I’m much more interested in
the rate and payment you can get than whatever mortgage-rate headline
you saw that morning.
Your actual financing can depend on your credit, loan program, down
payment, occupancy, points and other factors.
Then I want to look at the house.
How is it priced?
How long has it been sitting?
Has the seller reduced the price?
Are they offering concessions?
Could we negotiate closing costs or money toward a rate buydown?
What does that do to your actual monthly payment?
That’s where this gets interesting.
Because sometimes the opportunity isn’t hiding in the interest rate.
It’s hiding in the deal.
Jill’s Insider Tip
Before deciding that rates are “too high,” have a good lender run the
numbers on an actual purchase scenario.
If you don’t already have a lender you trust, I have several great
lenders I work with and I’m happy to connect you with one.
Then let me look at the real estate side.
A seller who has been sitting on the market may give us negotiating
opportunities that weren’t available when rates were lower and buyers
were fighting over the same house.
I want to know what the whole deal looks like before we decide whether
it makes sense.
Should You Wait for Mortgage Rates to Come Down?
Maybe.
If today’s payment doesn’t fit comfortably into your life, waiting may
be exactly the right decision.
But if you’re waiting because somebody told you mortgage rates are
definitely coming down after the next Fed meeting, I wouldn’t build a
housing plan around that prediction.
If rates eventually fall, great.
But you may also be shopping alongside more buyers. Sellers may
negotiate less. Home prices may be different.
There is no single number that tells us when it’s the perfect time to buy.
Jill’s Final Take
I’m not interested in convincing someone to buy a house because rates
might go up.
And I’m not interested in telling someone to wait because rates might come down.
I listen first.
What does this move need to accomplish for you?
Then we look at the house, the payment, your cash, the market, the
negotiating opportunity and what you’re giving up or gaining by
moving.
Sometimes I’m going to tell you I think the move makes sense.
Sometimes I may tell you I think you should stay put.
The question isn’t, “What is the Fed going to do?”
The better question is:
“Does doing this make sense for me?”
That’s the one I want to help you answer.
Ready to Look at the Numbers?
If you’re thinking about buying in the East Valley but aren’t sure
whether today’s rates make sense for you, give me a call.
If you need a lender, I can help with that too.
We can look at the numbers, the market and what you’re trying to accomplish.
No crystal ball required.
Jill Hamilton, REALTOR®
Buy Sell With Jill | West USA Realty
602-513-6209
JillHamilton.com
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