Whenever the Fed debates dropping the rate, inevitably buyers and sellers will ask me – that will help the market, right?
… mortgage rates actually follow the bond market, not the Fed-funds rate. The interest rate on a 30-year fixed-rate mortgage tracks the yield on the 10-year Treasury note (at yesterday’s close 4.383%. Track today’s rates here.). Lenders typically set their base mortgage rate around two percentage points higher than the 10-year bond yield.
…So if you want to know the direction of mortgage rates, you need to get a sense of where bond yields are heading
Let’s not discount the psychological impact of buyers and sellers hearing that “rates have dropped.” The perception that “rates are lower” may have a real impact on the local real estate market, whether they’ve dropped or not – particularly because nearly 40% of our active inventory (in Charlottesville/Albemarle) is priced above the $417,000 threshold that indicates “jumbo loan” territory.
That said, rates really aren’t high at all (look at March 1982, or March of 2002).
Read Noah’s outstanding analysis and commentary on why a recession is the most desirable outcome. Keeping government out of the equation as much as possible should be the goal for all involved.