Mortgage rates have officially hit the highest levels since May 2024. The recent low for the 30-year fixed mortgage was in September 2024, right when the Federal Reserve started to drop its overnight rate. This is a perfect example of the bond market “buying on the rumor (expectation for the Fed starting its rate-cutting process) and selling on the news (the actual cutting).”
As I’ve conveyed numerous times, mortgage-backed securities and rates don’t correlate directly with the Fed rate. The Fed Funds Rate has a direct effect on short-term rates and products like credit cards, home equity lines, or other adjustable-rate products. However, the 30-year fixed mortgage rate correlates with long-term rates, such as the 10-year note, which is influenced by international bond traders.
The economy is staying stronger, and inflation is stickier than expected when the Federal Reserve began lowering its overnight rate last September. It was expected by the financial markets and even the Federal Reserve that the Fed rate could drop substantially over the next year. Fed Chair Powell has subsequently conveyed that he expects rates to come down over time to a more neutral level, but they won’t be in a hurry. There’s no economic need or incentive to expedite dropping their rate.
The bond market doesn’t like uncertainty, which contributes to higher rates. The Trump administration’s potential tax reductions and regulatory cutbacks could be stimulative to the economy, while potential tariffs could be inflationary. High federal and local municipal deficits increase bond borrowing, driving rates higher.
Fingers crossed that rates settle down and that the new administration’s approach is productive.
Rate buydowns and adjustable-rate mortgages are short-term options. Ultimately, refinances will be back in play.
If you are in the Los Angeles area, and have any questions or real estate sales or financing needs, feel free to contact me
Ron Henderson GRI, SRES, SFR, RECS, CIAS, CREN, GREEN
President/Broker
Multi Real Estate Services, Inc.
Gov’t Affairs Chair – Southland Regional Association of Realtors (2025)
Gov’t Affairs Chair – California Association of Mortgage Professionals (2017-2018)
Chairman – OutWest Marketing Meeting (Real Estate Education)
BRE #00905793 NMLS #310358
www.mres.com
ronh@mres.com
Specialist in the Art of Real Estate Sales and Finance
Real Estate market, mortgage rates, Los Angeles, San Fernando Valley, Conejo Valley, Simi Valley, Woodland Hills, West Hills, Calabasas, Chatsworth
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