In Sept 24' 30-year fixed mortagge rates were at 6.18. The lowest they had been since Sept of 22'. In Sept 24' the Fed dropped the fed funds rates effective rate from 5.13 to 4.83%. the 50 BP rate cut we all remember. Mortgage rates went down, right? No, almost immediately mortgage rates jumped to 6.43% on their way to 7% by Jan even though the fed cut two more times lowering the effective Funds rate to 4.33.
https://fred.stlouisfed.org/graph/?g=YPBJand this is by no means an historical anomaly either. The fed funds rate is an overnight rate that banks lend to each other, and has very little to do with long term rates. The bond market sets long terms rates including what rates are for mortgage backed securties, and these MBS securties are what actual set mortgage rates. The fed funds rate is the most talked about rate in the whole complex, so if you and I know that the fed will likely cut in Sept, dont you think those who do it for a living likely do as well? The rate cut has already been priced in as a 88% proabailty so this is baked in up and down of the yield curve. Now, as I always tell borrowers the Powell press conferevne is more important then the actual cut or no cut (again, that is almost always known going)
https://www.cmegroup.com/markets/interest-rates/cme-fedwatch-tool.htmlThe myth that the Fed controls mortgage rates is just that a myth. But, it does have a hand in controlling HELOC's as they are typicaly based on Prime. and Prime is 3% over the Fed funds. so a .25% cut will drop most HELOC's by that same .25%.
