Anyone who’s had anything to do with real estate has played the “will they or won’t they” guessing game surrounding the Federal Reserve’s decisions about the federal funds rate.
It seems to make sense on its face, since mortgage rates are inextricable from the Fed’s policies. And yet the fact that recent reports show that refinancing activity (which right now accounts for the majority of mortgage applications in the U.S.) dipped 26.8% week over week as of the week ending Oct. 11, despite the much-anticipated rate cuts, should give everyone pause.
What does this unexpected turn of events tell us about the reality of the mortgage market and its possible future trajectories?
Key Rates Are Down, But Lenders Are Cautious
First, a recap: Mortgage rates went down to an average of 6.08% in late September, following the Fed’s half-point cut announcement on Sept. 18. In fact, mortgage rates already were on a downward trajectory since early September, but predictably, the Fed’s announcement delivered an impressive dip, from 6.20% to the just-above-6% many property owners had been hoping for. Refinancing activity surged accordingly, with a 20% spike week over week in late September.
So far, so good. Except, by Oct. 3, mortgage rates had climbed right back up to 6.12%. On Oct. 10, they stood at 6.32%….