“If we took the worst levels of the spreads from 2023 and incorporated those today, mortgage rates would be 0.58% higher right now,” Mohtashami wrote. “While we are far from being average with the spreads, the fact that we have seen this improvement is a plus this year.”
Mortgage rate movement has resembled a roller coaster ride over much of the past year. According to HousingWire’s Mortgage Rates Center, the 30-year conforming rate peaked at 7.87% at the end of October 2023 but dropped to 6.83% only two months later. More peaks and valleys followed before this year’s high-water mark of 7.58% on May 1.
Since the end of July — when the Fed signaled its intention to cut rates — the 30-year conforming rate has plummeted from 7.02% and stood at 6.27% as of Friday.
Lender perspective
Reaction to the Fed rate cut has been muted. Some real estate agents think interest rate cuts could be offset by a surge of demand that creates more bidding wars and higher sale prices. And because the Fed’s action was telegraphed well in advance, mortgage lenders and investors had already priced the cut into current loan rates.
In commentary published Wednesday after the decision, Zillow Home Loans Senior Economist Orphe Divounguy said that mortgage payments on the typical home bought today would cost $100 per month less than one bought in May. Along with being able to stretch their budgets further, buyers also have more supply to choose from as Zillow data shows that active listings are up 22% over the past year.
But Divounguy also expects demand to rise, which won’t help affordability.
“With lower mortgage rates comes a good chance buyers face more competition than they normally would in the fall, when the market usually cools off,” he wrote. “Lower rates should bring more buyers back into the market than sellers.”
Ryan expressed optimism for purchase and refinance lending based on the actions of consumers in the first few days following the Fed meeting. Even though mortgage rates didn’t immediately drop, Better has seen increased web traffic and lead volume since Wednesday.
“Given our technology and the way people surface financial decisions now, there’s a fair amount of people starting to get out there,” Ryan said.
“If you run a store, you need people to come into the store and browse around. Not all of them are going to buy, but if nobody comes into the store, I can tell you your sales are zero. If 100 people are coming into your store, it doesn’t mean your sales are 100, but people are actually coming to the store and I think you’re definitely getting more people reengaging in the marketplace.”
Although fears of a U.S. recession have been circulating for some time, the fact that inflation is nearing the Fed’s target of 2% per year makes the issue less prominent. Policymakers seem to be much more focused on the labor market, which has cooled of late, but Ryan said that “we’re still at full employment as an economy” and “the employment picture is pretty good by historical standards.”
As to the question of whether Fed policy has been too restrictive, Ryan conceded that a rate cut would’ve been welcomed sooner than it actually arrived.
“Yes, they were a little late, maybe on both ends — late to hike and now late to cut,” he said. “We’re biased; we’re in the housing industry. These high rates and lack of supply have crushed us as an industry. But all that being said, with your taxpayer/citizen hat on, they’ve done a pretty good job with a pretty tricky situation.”