Federal Mortgage and Federal Reserve: Everything must be known before tomorrow’s decision

On Wednesday, the Federal Reserve is expected to achieve Extension of stopping on interest rate discounts For a fourth consecutive period this year. Though Mortgage rates Some fluctuations can see, many economists expect to remain somewhat flat until the economic image changes significantly.

Prices will Stay in a range of 6.75 % to 7.25 % Unless the Federal Reserve refers to multiple discounts soon and supported by data, Nicole RothFrom the Rueth team with the mortgage of the movement. “The affairs of the buyers of the house may be disappointed significantly,” said Ruth.

The relationship between the interest rate decisions in the central bank and the rates of household loans are not direct or immediate. An example of this: The three interest rates of the Federal Reserve in 2024 did not translate into cheaper real estate loans. the The average price of a fixed home loan for 30 years It has been around 6.8 % since late autumn.

Often, what is the central bank He says About future plans the market can move more than its actual actions. Mortgage prices are paid by Bond marketThe investor expectations and a set of other economic factors.

“The mortgage prices are moving on expectations, not ads,” Ruth said.

Tomorrow’s focus will be on what Federal Reserve Chairman Jerome Powell says after the meeting. If Powell expresses his concern about persistent inflation or low price cuts, it is expected that bond returns and mortgage rates will rise. If it transmits optimism about inflation and suggests more policy reduction, mortgage rates may decrease.

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Here is what you need to know about how the government interest rate policies affect the mortgage market.

What is the relationship of the Federal Reserve to the mortgage rates?

The Federal Reserve is supervised and supervised by US monetary policy under a double mandate to maintain price stability and the maximum employment. It does this largely by controlling the rate of federal funds, and the rate that banks borrow and give their money.

When the economy weakens and the unemployment rose, the federal reserve Reduces interest rates To encourage spending and push growth, as it did during the Covid-19s.

It does the opposite when the inflation is high. For example, the Federal Reserve raised the standard interest rate of more than five percentage points between early 2022 and MID-2023 to slow down prices by curbing borrowing and spending.

The changes in the cost of borrowing began in a series of slow reaction that eventually affects the mortgage rates Housing marketAs banks have passed along the high federal reserve rate or discounts for consumers through long -term loans, including home loans.

However, since mortgage rates respond to many economic factors, it is not uncommon for federal funds and mortgage rates in different directions for some time.

Why are the interest rates in the federal reserve?

After making three interest rates in 2024, the federal reserve is now in a decade style. With President Donald Trump The unexpected tariff campaignEconomists say that federal immigration and pieces threaten to raise prices and withdraw growth, and economists say the central bank has a good reason to stop.

The federal reserve said in one of the most difficult sites in recent economic history. Ali WolfZonda and Newhomesource, the chief economist.

Reduction of interest rates may allow the rise in high Bad for mortgage rates. However, maintaining rates is high, increases the risk of stagnation to lose jobs that may cause widespread financial hardship.

Modern data shows that inflation achieves slow but fixed progress towards the annual rate of 2 %. But given the uncertainty surrounding Trump’s economic schedule, the central bank is not in a hurry to low borrowing rates.

What are the expectations for interest rate discounts in 2025?

Although Powell is still not binding on any specific time frame, experts are now Expect the interest rate reduction in the fall.

“I look forward to reducing the first price, if inflation continues to cool down and the labor market weakens,” said Ruth.

However, the customs tariff is the large wild card. Ruth said that if a Trade war Fuel inflation, prices can jump even without the Federal Reserve move. Political imbalance, global debt and instability are a recipe for price fluctuations.

“The mortgage market interacts quickly with uncertainty, and we are not a shortage of it this summer,” Ruth said.

On the other side, if the unemployment mutations – real possibility High unemployment claims The Federal Reserve can be forced to implement interest rate discounts early than expected. In this case, you should gradually reduce mortgage rates, but not significantly.

Most housing market ExpectationsIt is already a fawn discounts at at least 0.25 %, and called for mortgage rates for 30 years to survive Above 6.5 % Throughout 2025.

“We may see that rates settle down to the mid -6 ​​% by the end of the year,” said Ruth. “But we do not return to 3 %.”

What are the other factors that affect mortgage rates?

Mortgage rates Move for many of the same reasons that make home prices: supply, demand, inflation and even employment.

Personal factors, such as housing buyers Creditand Premium And the amount of home loan, also specifying the individual mortgage rate. various Types of loans and conditions Also vary Useful interest rates.

Politics changes: When the Federal Reserve controls the rate of federal funds, it affects many aspects of the economy, including mortgage rates. The rate of federal funds affects the amount of banks ’cost to borrow the money, which in turn affects the consumer banks to make a profit.

Economic inflation: generally, When inflation is highReal estate mortgage rates tend to be high. Since inflation comes out of the purchase force, lenders have put higher interest rates on loans to compensate for this loss and ensure profit.

I offer and demand: When the demand for real estate loans is high, lenders tend to raise interest rates. This is because they only have a lot of capital for lending in the form of household loans. On the contrary, when the demand for mortgages is low, lenders tend to reduce interest rates to attract borrowers.

Bond market activity: The mortgage lenders explain the fixed interest rates, such as the mortgages with a fixed rate, to the prices of bonds. Mortgage bonds, also called the mortgage -backed securities, are a package of real estate loans that are sold to investors and closely related to a 10 -year treasury. When the interest rates are high, the bond has a lower value in the market as investors buy and sell securities, causing high real estate interest rates.

Other main indicators: Employment patterns and other aspects of the economy affect the investor’s confidence, consumer spending and borrowing of mortgage rates. For example, a Strong job report A strong economy can indicate an increase in the demand for housing, which may lead to upward pressure on mortgage rates. When the economy and unemployment slow down, the mortgage rates tend to be less.

Read more: Check the truth: Trump does not have the authority to impose low interest rates

Is now a suitable time to get a mortgage?

Although the timing is everything in the mortgage market, you cannot control what the Federal Reserve does. “The prediction interest rates are almost impossible in today’s market,” Wolf said.

Regardless of the economy, the most important thing when shopping for a mortgage is to make sure that you can conveniently withstand your monthly payments.

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