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What will happen to mortgage rates after this week’s Fed rate cut?
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Those who were looking to buy a home finally got a major reprieve in September when mortgage interest rates plunged to a two-year low. That came right before the Federal Reserve issued a larger-than-anticipated 50 basis point reduction to its federal funds rate. And it came after years of rising rates, which, at one point, caused those on mortgages to hit their highest level since 2000. But a rate cut in September was supposed to be a precursor to a wider, cooling mortgage rate climate.
But that’s not what happened in October. Encouraged by positive economic data surrounding inflation and unemployment, lenders started raising interest rates as quickly as they dropped them on the assumption that future rate reductions were unlikely to be as substantial as September’s was. And homebuyers and those looking to refinance suffered, as they saw rates on purchases and refinances rise by approximately a full percentage point again. Despite the 50 basis point reduction, mortgage interest rates as of October 31 were just 6.72% on a 30-year mortgage – which is pretty much where they were on August 1, before rates were even cut, according to FreddieMac data.
However, this week, the Federal Reserve is set to meet again in the first meeting since September’s rate cut, and another reduction looks likely. So there’s reason for cautious optimism. But what, exactly, will happen to mortgage rates after this week’s Fed rate cut? That’s what we’ll attempt to break down below.
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What will happen to mortgage rates after this week’s Fed rate cut?
The CME Group’s FedWatch tool has an interest rate cut probability in the amount of 25 basis points pegged at more than a 99% certainty. So the federal funds rate will almost certainly fall once again, this time to a range between 4.50% and 4.75%. But the effect that will have on today’s mortgage interest rates is likely to be muted, for a variety of reasons. Here are three:
Reductions are already priced in: Many lenders already assume the federal funds rate will fall by 25 basis points and have priced in these reductions into their offers preemptively. So you’re unlikely to see a major difference in what rates are offered now and what are offered by the end of the week. That said, if the reduction is 50 basis points instead of the predicted 25, mortgage rates may drop by a more significant margin.
Learn more about your current mortgage rate options here.
Mortgage rates are influenced by more than just the Fed: As demonstrated in October when there was no Fed meeting but still a significant increase in mortgage rates, borrowers should know that mortgage rates are affected by more than just Fed actions. Data surrounding unemployment and inflation could also affect what lenders offer borrowers. And the 10-year Treasury yield also has a significant impact. So if these all don’t trend in a positive direction for borrowers, a simply 25 basis point cut by the Fed is unlikely to help much (if at all).
Relief will be gradual: The dramatic interest rate cuts many borrowers experienced in 2020 may have led some to believe that rates can move in a quick and dramatic fashion. But that was directly the result of the pandemic and, has been seen since as inflation rose, the rise in rates was gradual, taking place over much of the last two years. Relief, then, will be gradual, too.
Multiple reductions to the federal funds rate will need to take place, likely in increments larger than 25 basis points, for borrowers to see relief. And a number of factors could cause either those increments to remain small – or even lead to a pause in rate cuts in full. Understanding this real potential, then, borrowers who have found their dream home now may be better served by buying it anyway – and refinancing their mortgage when the rate climate has leveled off.
The bottom line
Mortgage rates could drop again after this week’s predicted Fed rate cut but major relief is likely to be delayed. That’s because this week’s cut is expected to be minimal and has already been priced in, in advance, by many lenders. Plus, mortgage rates are influenced by more than just what the Fed does or doesn’t do and it will likely take as much time to get rates low again as it did to have them rise. So, if you’ve found a home you want to buy or will see significant relief from refinancing now, even if the available rates are less than ideal, consider acting anyway.
Have more mortgage rate questions? Learn more here today.
U.S. and European law enforcement agencies are working together to investigate whether incendiary devices detonated in July at DHL logistics hubs in Germany and the U.K. were part of a larger operation directed by Russian Intelligence services (in particular, the GRU — Russian military intelligence), the highest level of the Russian government or by outside individuals acting in the interests of Russia, a source familiar with the matter said.
Officials are working to determine whether the larger operation was to place similar devices on aircraft servicing the U.S. and U.S. allies. The Wall Street Journal first reported the alleged plot targeting U.S. aircraft.
The 2025 Homeland Threat Assessment published at the end of October said the U.S. continues to be concerned about threats to the aviation and air cargo systems, including the “potential use of the air cargo supply chain to ship concealed dangerous and potentially deadly items.”
DHL said in a statement that it was aware “of two recent incidents involving shipments in our network. We are fully cooperating with the relevant authorities to protect our people, our network and our customers’ shipments.”
“We continually adjust our security posture as appropriate and promptly share any and all relevant information with our industry partners, to include requirements and recommendations that help them reduce risk,” the Transportation Security Administration said in a statement.
“Over the past several months, as part of a multi-layered security approach, TSA worked with industry partners to put additional security measures for U.S. aircraft operators and foreign air carriers regarding certain cargo shipments bound for the United States, in line with the 2021 TSA Air Cargo Security Roadmap,” the TSA’s statement continued.
The FBI declined to comment.
contributed to this report.
Boeing’s 33,000 unionized machinists on Wednesday voted to approve the plane manufacturer’s latest contract offer, ending a seven-week strike that had halted production of most of the company’s passenger planes.
The union said 59% voted to accept the contract. Members have the option of returning to work as soon as Wednesday, but must be back at work by Tuesday, November 12, the union said in a statement.
Union leaders had strongly urged members to ratify the latest proposal, which would boost wages by 38% over the four-year life of the contract, up from a proposed increase of 35% that members of the International Association of Machinists and Aerospace Workers (IAM) had rejected last month.
The revised deal also provides a $12,000 cash bonus to hourly workers and increased contributions to retirement savings plans. The enhanced offer doesn’t address a key sticking point in the contentious talks — restoration of pensions — but Boeing would raise its contributions to employee 401K plans.
Average annual pay for machinists, now $75,608, would climb to $119,309 in four years under the current offer, Boeing said.
The vote came after IAM members in September and October rejected lesser offers by the Seattle-based aerospace giant.
“In every negotiation and strike, there is a point where we have extracted everything we can in bargaining and by withholding our labor,” the International Association of Machinists and Aerospace Workers stated last week in backing Boeing’s revised offer. “We are at that point now and risk a regressive or lesser offer in the future.”
Acting U.S. Labor Secretary Julie Su has played an active role in the negotiations, after recently helping to end a days-long walkout that briefly closed East and Gulf Coast ports.
The Boeing strike that began on Sept. 13 marked the latest setback for the manufacturing giant, which has been the focus of multiple federal probes after a door plug blew off a 737 Max plane during an Alaska Airlines flight in January. The incident revived concerns about the safety of the aircraft after two crashed within five months in 2018 and 2019, killing 346 people.
Boeing in July agreed to plead guilty to conspiracy to commit fraud for deceiving regulators who approved the 737 Max.
During the strike, Boeing was unable to produce any new 737 aircraft, which are made at the company’s assembly plants in the Seattle area. One major Boeing jet, the 787 Dreamliner, is manufactured at a nonunion factory in South Carolina.
The company last month reported a third-quarter loss of $6.1 billion.
contributed to this report.
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