Mortgage rates drop to 3-year low ahead of Fed meeting

Mortgage rates dropped sharply Tuesday, as traders in mortgage-backed bonds appeared to purchase in ahead of a extensively anticipated price minimize by the Federal Reserve.

The common price on the 30-year mounted mortgage dropped 12 foundation factors from Monday to 6.13%, in accordance to Mortgage News Daily. That is the bottom stage since late 2022.

“The overall set-up is reminiscent of September 2024 when rates were doing the same thing for the same reasons ahead of Fed meeting with a virtual 100% chance of a rate cut,” mentioned Matthew Graham, chief working officer of Mortgage News Daily. “Back then, mortgage rates moved paradoxically higher after the Fed rate cut. The same thing could happen this time, but it’s by no means guaranteed.”

It additionally follows historic tendencies. In a video podcast for CNBC’s Property Play, Willy Walker, CEO of business actual property agency Walker & Dunlop mentioned there have been related tendencies previously.

“If you go back to 1980 and the nine Fed rate cut periods over that 45-year period, the ones where the Fed cuts in a recessionary environment end up pulling down the long end of the curve, pull down the 10-year, pull down the 5-year,” Walker mentioned. “In those where it’s not a recession, which is like right now, it does not impact long-term rates. And so as much as I’m expecting us to see at least a 25 basis point cut, and then probably another 25 basis point cut, even if you take 50 basis points out of the short end of the curve, I don’t expect it’s going to impact the long end of the curve very much.”

He added that he thinks yields are nicely under the place they are going to be two or three weeks from now.

“I don’t try to predict where rates are going, but I think people … might buy on the rumor and sell on the news. I think you probably see the 10-year sell off a little bit after the Fed actually announces their 25 basis point cut,” Walker mentioned.