With one day left until the presumed announcement of a benchmark interest rate cut from the Federal Reserve, all eyes in the mortgage world are firmly affixed toward the ongoing meeting of the central bank’s Federal Open Market Committee — and everyone’s got something to say.
“The fog may finally be clearing on the refinance market, with opportunity beginning to emerge for folks who purchased in recent years with the hope, or even expectation, that they would be able to refinance and improve their payments when the Fed let off the brakes on their rate policy,” said Andy Walden, vice president of research and analysis at Intercontinental Exchange.
Here’s what other people from all corners of the mortgage world are voicing ahead of the widely anticipated move:
Melissa Cohn, regional vice president, William Raveis Mortgage
“Wait for the Fed meeting to end. What [Federal Reserve Chair Jerome] Powell says about the economy and future rate cuts will be important to the direction of mortgage rates as the Fed’s monetary policy is driven by economic data, just as the bond market is.”
Selma Hepp, chief economist, CoreLogic
“The recent decline in mortgage rates is contributing to the momentum toward normalization and unleashing the housing market potential in the next few years. About 4 million homes have a refinance opportunity with rates falling closer to 6% and there are more in the pipeline as the Fed starts the easing cycle. It’s important to note that lower rates have been a hot topic for a while, and potential homebuyers have been on the sidelines in anticipation of lower rates and improved affordability. With rates coming down over the last four weeks, CoreLogic data revealed that pending home sales have finally started to show consistent improvement over last year’s activity. The Fed plans to continue gradually reducing rates without making any drastic moves, unless there is a significant increase in unemployment claims, for instance.”
Satyan Merchant, senior vice president, automotive & mortgage business, Transunion
“Assuming that the Federal Reserve does indeed follow through with previous indications to lower interest rates at next week’s meeting, it may finally stimulate a mortgage market that has been sluggish for quite a while, nudging many consumers who have been holding off to return to the market.
“A reduction of even 25 basis points in mortgage rates could result in real money staying in the pockets of consumers. For example, U.S. consumers with a mortgage balance of $244,000 who currently have a 7% interest rate could see a potential reduction of almost $50 a month in their monthly mortgage payment. And if the reduction is 50 bps, that same consumer could potentially save almost $100 a month when making that same mortgage payment. And in states where the average mortgage balance is higher, those savings could be even greater. One example is California where the average mortgage balance is more than $430,000. A reduction of 25 bps could save those same consumers about $75 a month and nearly $150 if rates drop 50 bps.”
Max Slyusarchuk, CEO, A&D Mortgage
“Much of the Fed’s predicted rate cuts have already been priced in by rates traders, who believe that homebuyers have been on the sidelines waiting for lower rates. We are already seeing benefits for homebuyers who see rates decreasing. Origination volumes at mortgage lenders like A&D Mortgage have already seen growing lending activity, with first half originations in 2023 totaling just over $1 billion vs. over $1.5 billion in 2024, representing a year over year increase of 50%. We are excited about the macroeconomic tail winds provided to mortgage lenders by upcoming Fed monetary policy and look forward to servicing our borrowers as best we can as demand for mortgage financing and re-financing increases into 2025.”
Jonathan Treble, founder and CEO, WithMe
“I interface with a wide network of institutional multifamily owners and operators across the country and virtually everyone is eager for the Fed to make bold moves toward quantitative easing. Wednesday’s announcement, whether a quarter-point cut or a half-point cut, is welcomed and feels overdue to most of our clients. They see it as the first in a series of many cuts over the next 12 months that will help rein in debt-servicing costs and also jumpstart deal activity. So many properties were financed or re-financed in the frenzied market of 2021 that the Fed’s tightening campaign since then made many of our client properties face real struggles with cash flow when their debt-service costs rose, along with record cost increases in labor and insurance premiums.”
Geri Borger Urgo, head of production, NewPoint Real Estate Capital
“I’m relatively confident we’ll see a 25-bps reduction, though, at the end of the day, the market has already priced in a rate cut. In my mind, the real question is not about 50 bps or 25 bps this week, but about how fast and how far the Federal Reserve intends to roll back rates. Historically, the Fed has cut rates faster than it increases them. On the other hand, they want to avoid panic in the market by aggressively cutting too fast. One significant benefit of being on the cusp of a lower-rate environment is that the cost of interest rate caps is at a low for 2024. This is a welcome development that establishes a greater degree of market certainty.”
Charles Williams, CEO, Percy.ai
“The soft landing is working, and the Fed is looking to stimulate housing while the economy is still somewhat in a good spot in terms of inflation and consumer confidence. They will need to lower rates more to create a mini refinance boom, and builders are now constructing more starter homes. So, with additional rate cuts coming later this year, 2025 will see a housing market rebound in both existing and new home sales.”
Sam Williamson, senior economist, First American Financial Corp.
“Markets are pricing in about a 40% chance of a 50-bps cut, suggesting that investors view the recent cooling in the labor market in August as justification for a more aggressive rate-cutting approach. While a 50-bps cut may be discussed during the meeting, it’s unlikely because the Fed wants to avoid conveying a sense of alarm or signaling they may be behind the curve in cutting rates. Additionally, recent economic data hasn’t shown further deterioration.
“Should investors recalibrate their expectations after the September FOMC meeting for fewer cuts this year than currently anticipated, we may see Treasury yields, and consequently mortgage rates, rise in the short term. In the medium-term, we anticipate further, though gradual, declines in mortgage rates. … However, lower mortgage rates might stimulate demand more than it increases supply. Historically, existing home inventory has constituted the majority of total inventory, and about 86% of current homeowners have a mortgage rate below 6%. Therefore, even if mortgage rates gradually decline through the rest of the year, they are unlikely to decrease sufficiently to ‘unlock’ the majority of these homeowners.”
