The Week in Review: September 30, 2024
A Fed Rate Cut and Your Mortgage Rate
A recent online advertisement from a major bank read, “The Fed just lowered interest rates. Could refinancing save you money?”
The ad implicitly assumes that the Fed’s half-percentage point rate reduction brought about a significant drop in mortgage rates shortly after the decision.
It didn’t. Why not? Changes in the fed funds rate indirectly influence but don’t mirror fixed mortgage rates. Last Thursday, Freddie Mac’s weekly survey pegged the 30-year fixed rate mortgage at 6.08%, down from 6.09% the prior week and 6.20% two weeks ago.
Instead, the 10-year Treasury bond yield has the most significant influence. It’s not a one-to-one lockstep relationship, but changes in the 10-year Treasury yield directly impact fixed mortgage rates, as shown below.
While homebuyers and those who may want to refinance may have been disappointed that a big drop in mortgage rates wasn't forthcoming, rates are down sharply from the 2024 high of 7.22% in early May.
And they are down significantly from August 1, when the 30-year stood at 6.73%.
What else influenced the summer’s decline in mortgage rates?
In addition to the 10-year Treasury, there was increased speculation about a rate cut by the Fed during the summer, which contributed to the decrease in Treasury yields. The softer labor market and the slowdown in the rate of inflation also influenced the decline in yields.
Plus, demand for mortgage-backed securities, which are bundled by lenders and sold on the secondary market, can affect rates.
If demand for these securities is high, rates may come down slightly. When demand falls off, rates may tick higher to attract buyers.
Market Summary
Two for the Road
Venezuelan strongman President Nicolás Maduro, keen to distract Venezuelans from his rigging of July elections, ongoing crackdown, and the nation’s economic collapse, expressed his desire for unity by decreeing that Christmas will start on October 1 this year. - Global News, September 4, 2024
An index of Rolex Watch Prices is at its lowest level since November 2020, down 30% from the peak in March 2022. - The Week in Charts, September 18, 2024
Please do not hesitate to contact me with any questions or concerns. I hope you have a wonderful week!
Bill Stordahl, CFP®
Managing Director
Stordahl Capital Management
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