I hope you’re having a fantastic week. It’s hard to believe we’re already at the beginning of October!
The big news this week was the Fed’s recent rate cut, which you would think would lead to lower mortgage rates, right? Well, that’s where things get interesting. After the Fed’s announcement, mortgage rates actually crept up a bit. This might seem confusing, but it’s all tied to how the broader economy is performing. Think of it like this: the economy is resilient, and because of that, mortgage rates are feeling a little pressure to rise.
Here’s the rundown on what’s happening:
The Economy is Holding Strong
The U.S. economy is in a surprisingly good spot. The latest report for the second quarter showed that our economy grew faster than anyone expected. This means businesses are busy and consumers are still spending, which are all signs of a healthy economy.
This strength, however, can put upward pressure on interest rates. When the economy is growing so well, the Federal Reserve might not feel the need to cut rates as quickly to stimulate growth.
Another sign of this strength is in durable goods orders, which are big-ticket items like cars and appliances. These orders jumped up in August, showing that people and businesses are confident enough to make big purchases. While that’s great for the economy, it also signals strong demand that could keep inflation a little stubborn, which makes the Fed cautious about cutting rates too soon.
Mortgage Rates Are Moving in a Narrow Range
For the past week or so, mortgage rates have been holding in a very narrow range. As of September 25, the average 30-year fixed mortgage rate was up slightly – by .04 percent – from the previous week.
Interestingly, even with these rates inching up, both purchase and refinance applications are up significantly compared to last year. This tells us that despite the small increases, people are still actively looking to buy or refinance their homes. It shows how resilient the housing market is!
A lot of this day-to-day movement in rates is influenced by a number of factors, including big institutional trading that happens at the end of the month or quarter.
Looking Ahead to October
All eyes are on the upcoming jobs reports, which are a big part of what the Fed looks at when making decisions. We’ll be keeping a close watch on the ADP private payrolls report and the official Jobs Report from the government.
Strong job growth could signal to the Fed that the economy is still too hot for aggressive rate cuts. However, a weaker report could open the door for deeper cuts in the future.
If you have any questions about what this all means for your unique situation, whether you’re a first-time homebuyer, looking to refinance, or just curious about the market, please don’t hesitate to reach out. I’m always here to help!
