Latest news with #NicoleRueth
CNET
12 hours ago
- Business
- CNET
Mortgage Rates and the Fed: Everything to Know Before This Week's Meeting
The Fed's interest rate decisions impact mortgages, but the relationship isn't straightforward. Tharon Green/CNET On Wednesday, the Federal Reserve is expected to extend a pause on interest rate cuts for a fourth consecutive time this year. Though mortgage rates could see some volatility, many economists expect them to stay somewhat flat until the economic picture drastically changes. Rates will stay in the 6.75% to 7.25% range unless the Fed signals multiple cuts soon and backs it up with data, said Nicole Rueth, of the Rueth Team with Movement Mortgage. "Homebuyers waiting on rates to drop drastically might be disappointed," Rueth said. The relationship between the central bank's interest rate decisions and home loan rates isn't direct or immediate. Case in point: The Fed's three interest rate cuts in 2024 didn't translate into cheaper mortgages. The average rate for a 30-year fixed home loan has hovered around 6.8% since late fall. Often, what the central bank says about future plans can move the market more than its actual actions. Mortgage rates are driven by the bond market, investor expectations and a host of other economic factors. "Mortgage rates move on expectations, not announcements," said Rueth. The focus will be on what Fed Chair Jerome Powell says following the meeting. Should Powell express concern over lingering inflation or a reduced number of rate cuts, bond yields and mortgage rates are expected to rise. If he conveys optimism about inflation and suggests further policy easing, mortgage rates may decline. "It's most often the case that longer-term interest rates begin to decline before the Fed cuts rates," said Keith Gumbinger, vice president at Here's what you need to know about how the government's interest rate policies influence the mortgage market. What is the Fed's relationship to mortgage rates? The Fed sets and oversees US monetary policy under a dual mandate to maintain price stability and maximum employment. It does this largely by adjusting the federal funds rate, the rate at which banks borrow and lend their money. When the economy weakens and unemployment rises, the Fed lowers interest rates to encourage spending and propel growth, as it did during the COVID-19 pandemic. It does the opposite when inflation is high. For example, the Fed raised its benchmark interest rate by more than five percentage points between early 2022 and mid-2023 to slow price growth by curbing consumer borrowing and spending. Changes in the cost of borrowing set off a slow chain reaction that eventually affects mortgage rates and the housing market, as banks pass along the Fed's rate hikes or cuts to consumers through longer-term loans, including home loans. Yet, because mortgage rates respond to several economic factors, it's not uncommon for the federal funds rate and mortgage rates to move in different directions for some time. Why is the Fed putting off interest rate cuts? After making three interest rate cuts in 2024, the Fed is now in a holding pattern. With President Donald Trump's unpredictable tariff campaign, immigration policies and federal cutbacks threatening to drive up prices and drag on growth, economists say the central bank has good reason to pause. "The Federal Reserve is in one of the trickiest spots in recent economic history," said Ali Wolf, Zonda and NewHomeSource chief economist. Lowering interest rates could allow inflation to surge, which is bad for mortgage rates. Keeping rates high, however, increases the risk of a job-loss recession that would cause widespread financial hardship. Recent data show inflation making slow but steady progress toward the Fed's annual target rate of 2%. But given the uncertainty surrounding Trump's economic agenda, the central bank isn't in a hurry to lower borrowing rates. 6 Ways to Reduce Your Mortgage Interest Rate by 1% or More 6 Ways to Reduce Your Mortgage Interest Rate by 1% or More Click to unmute Video Player is loading. Play Video Play Skip Backward Skip Forward Next playlist item Unmute Current Time 0:00 / Duration 2:31 Loaded : 23.60% 0:00 Stream Type LIVE Seek to live, currently behind live LIVE Remaining Time - 2:31 Share Fullscreen This is a modal window. Beginning of dialog window. Escape will cancel and close the window. Text Color White Black Red Green Blue Yellow Magenta Cyan Opacity Opaque Semi-Transparent Text Background Color Black White Red Green Blue Yellow Magenta Cyan Opacity Opaque Semi-Transparent Transparent Caption Area Background Color Black White Red Green Blue Yellow Magenta Cyan Opacity Transparent Semi-Transparent Opaque Font Size 50% 75% 100% 125% 150% 175% 200% 300% 400% Text Edge Style None Raised Depressed Uniform Drop shadow Font Family Proportional Sans-Serif Monospace Sans-Serif Proportional Serif Monospace Serif Casual Script Small Caps Reset Done Close Modal Dialog End of dialog window. Close Modal Dialog This is a modal window. This modal can be closed by pressing the Escape key or activating the close button. Close Modal Dialog This is a modal window. This modal can be closed by pressing the Escape key or activating the close button. 6 Ways to Reduce Your Mortgage Interest Rate by 1% or More What is the forecast for interest rate cuts in 2025? Though Powell remains noncommittal on any specific time frame, experts now predict an interest rate cut in the fall. "I'm eyeing September for the first rate cut, if inflation keeps cooling and the labor market weakens," Rueth said. However, tariffs are the big wildcard. Rueth said that if a trade war fuels inflation, rates could jump even without a Fed move. Political dysfunction, rising debt and global instability are also a recipe for rate volatility. "The mortgage market reacts fast to uncertainty, and we've got no shortage of it this summer," Rueth said. On the flip side, if unemployment spikes -- a real possibility given rising jobless claims -- the Fed could be forced to implement interest rate cuts earlier than anticipated. In that case, mortgage rates should gradually ease, though not dramatically. Most housing market forecasts, which already factor in at least two 0.25% Fed cuts, call for 30-year mortgage rates to stay above 6% throughout 2025. "We might see rates settle into the low to mid-6% by year-end," Rueth said. "But we're not going back to 3%." What other factors affect mortgage rates? Mortgage rates move around for many of the same reasons home prices do: supply, demand, inflation and even the employment rate. Personal factors, such as a homebuyer's credit score, down payment and home loan amount, also determine one's individual mortgage rate. Different loan types and terms also have varying interest rates. Policy changes: When the Fed adjusts the federal funds rate, it affects many aspects of the economy, including mortgage rates. The federal funds rate affects how much it costs banks to borrow money, which in turn affects what banks charge consumers to make a profit. Inflation: Generally, when inflation is high, mortgage rates tend to be high. Because inflation chips away at purchasing power, lenders set higher interest rates on loans to make up for that loss and ensure a profit. Supply and demand: When demand for mortgages is high, lenders tend to raise interest rates. This is because they have only so much capital to lend in the form of home loans. Conversely, when demand for mortgages is low, lenders tend to slash interest rates to attract borrowers. Bond market activity: Mortgage lenders peg fixed interest rates, like fixed-rate mortgages, to bond rates. Mortgage bonds, also called mortgage-backed securities, are bundles of mortgages sold to investors and are closely tied to the 10-year Treasury. When bond interest rates are high, the bond has less value on the market where investors buy and sell securities, causing mortgage interest rates to go up. Other key indicators: Employment patterns and other aspects of the economy that affect investor confidence and consumer spending and borrowing also influence mortgage rates. For instance, a strong jobs report and a robust economy could indicate greater demand for housing, which can put upward pressure on mortgage rates. When the economy slows and unemployment is high, mortgage rates tend to be lower. Read more: Fact Check: Trump Doesn't Have the Power to Force Lower Interest Rates Is now a good time to get a mortgage? Even though timing is everything in the mortgage market, you can't control what the Fed does. "Forecasting interest rates is nearly impossible in today's market," said Wolf. Regardless of the economy, the most important thing when shopping for a mortgage is to make sure you can comfortably afford your monthly payments. More homebuying advice
CBS News
14 hours ago
- Business
- CBS News
3 mortgage interest rate scenarios lenders say are possible this summer
We may receive commissions from some links to products on this page. Promotions are subject to availability and retailer terms. There could be shifts to mortgage rates this summer, experts say, but multiple factors could have an impact. Getty Images/iStockphoto While inflation has declined from its recent peak, today's inflation rate is still higher than the Federal Reserve's 2% target, leaving the Fed to maintain its careful approach to the rate environment. Mortgage rates, in turn, have hovered in the high 6% range, keeping many prospective homebuyers out of the market. So, as we head into summer, the big question is: Will the mortgage rate climate change? Economic reports on inflation, employment and consumer spending will help determine whether borrowing costs finally ease or remain elevated through the warmer months. To help you understand what might happen, we asked home lending experts to outline three possible mortgage rate scenarios. Here's what they want you to know. Compare the mortgage rates you could qualify for online now. 3 mortgage interest rate scenarios lenders say are possible this summer While mortgage rates could change over time, industry professionals generally don't foresee dramatic mortgage rate swings this summer. "Unless we get a clear break in labor or inflation unexpectedly cools, we'll stay in this frustrating middle ground, hovering around 6.875% to 7.125%," says Nicole Rueth, Denver Metro Association of Realtors market trends committee member founder of The Rueth Team. Mortgage lender loanDepot's sales manager, Debbie Calixto, agrees that major changes are unlikely. "There may be minor fluctuations," Calixto says. "[But] unless there's a significant shift in the broader economic environment, mortgage rates are likely to remain stable in the high 6% range." The most optimistic prediction comes from Steven Glick, director of mortgage sales at real estate investment fintech company HomeAbroad. He sees potential for a modest decline, with 30-year fixed mortgage rates potentially averaging around 6.6% by August. While the outlook is for limited movement, certain economic triggers may push rates in different directions. Here are three scenarios we could see play out: Mortgage interest rates could remain the same For mortgage interest rates to remain the same, we would need economic conditions to stay roughly where they are, experts say. "Slight market and economic fluctuations can occur, as long as there are no major developments that push things in either a positive or negative direction," Phil Crescenzo Jr., vice president of the Southeast Division of Nation One Mortgage Corporation, explains. Rueth breaks down what this looks like in practice. "If inflation drifts sideways, the job market stays soft-but-not-broken and the Fed keeps waiting for clarity, mortgage rates won't have a reason to move meaningfully," Rueth says. The bond market thrives on conviction. Without clear signals pushing rates in either direction, they're likely to hold steady. Assuming this scenario plays out, experts recommend focusing on other variables you can control. For example, you might negotiate rate buydowns, seller concessions or explore different loan programs to save money when buying a home. Find out how affordable the right mortgage loan could be today. Mortgage interest rates could rise For mortgage interest rates to rise, we'd need to see several economic shifts occur, experts say. The following developments could trigger higher rates this summer, according to Glick: Inflation jumps above 3%, driven by rising costs for energy, housing or everyday goods. The economy grows too fast, with unemployment dropping below 4%, or gross domestic product (GDP) growth exceeding 3.5%. The 10-year Treasury yield "Inflation spikes or robust growth would spook bond markets, pushing Treasury yields up," Glick warns. For homebuyers, this would mean higher monthly payments and reduced purchasing power in an already challenging market. If you see these economic shifts begin to materialize, it might make sense to lock in your rate before conditions worsen. Mortgage interest rates could decline For mortgage interest rates to decline, the economy must show signs of cooling. "We'd need a real pivot moment — like a clear, sustained drop in inflation or a crack in employment that forces the Fed to cut sooner than expected," Rueth says. Weak economic reports this summer could provide that catalyst. "A cooling economy or softer labor market reduces inflationary pressure, prompting the Fed to cut rates," says Glick. "This would [bring down] Treasury yields, and mortgage rates follow suit." Should rates begin to fall, it's smart to expect increased competition as sidelined buyers quickly return to the market. This could mean a return to bidding wars and rising home prices, offsetting some of the savings from lower mortgage rates. The bottom line While notable mortgage rate changes are unlikely this summer, other scenarios could still unfold. Trying to time the market perfectly is difficult and counterproductive, though. "More often than not, this leads to missed opportunities," cautions Calixto. Today's real estate market offers advantages that weren't available during recent frenzied buying periods: less competition and more negotiating power. So if a home aligns with your budget and needs, consult a mortgage lender to lock in a rate soon. And, remember that while rates might drop, home prices likely won't. "Every month you wait is another month of someone else's equity growing instead of yours," Rueth says.
CNET
06-05-2025
- Business
- CNET
How the Federal Reserve Affects Mortgage Rates
The Fed's interest rate adjustments matter for the housing market, just not in the way you think. Getty/saifulasmee chede/CNET The Federal Reserve is almost certain to hold interest rates steady on Wednesday, despite President Trump's demand that they be slashed immediately. If you're in the market for a home, you might be wondering what that means for mortgage rates. When the Fed adjusts its benchmark interest rate, interest rates on savings accounts and short-term loan vehicles follow quickly. Long-term rates like mortgages, however, take their cues from the broader economic outlook and fiscal indicators rather than directly from policymakers' moves. Given today's turbulent political and economic environment, mortgage rates have the potential to wildly fluctuate up or down — or they could stay relatively steady in the 6% to 7% range. "The Fed doesn't set mortgage rates, but it sets the tone," said Nicole Rueth of The Rueth Team with Movement Mortgage. Mortgage rates are closely tied to the bond market and investor predictions about what's next. Right now, Trump's erratic tariff campaign has generated widespread uncertainty among bond investors, resulting in volatility in the mortgage market. What are the main considerations of the Fed? After three interest rate cuts in 2024, the Fed has been in a holding pattern this year. The central bank needs to gauge how Trump's economic agenda, particularly around trade, immigration and government spending, will affect inflation and employment. There are also concerns about a potential US recession, marked by a shrinking GDP, rising jobless claims and falling consumer confidence. "The Federal Reserve is in one of the trickiest spots in recent economic history," said Ali Wolf, Zonda and NewHomeSource chief economist. Lowering interest rates could allow inflation to surge, which is bad for mortgage rates. Keeping rates high, however, increases the risk of a job-loss recession that would cause widespread financial hardship. "This is why there's been a lot of 'wait and see' happening from the Fed," Wolf said. In the mortgage market, what the central bank says matters more than what it does. Tomorrow, investors will be scrutinizing Fed Chair Jerome Powell's remarks for clues about how policymakers are weighing economic risks. If Powell signals concerns about inflation or mentions the possibility of fewer rate cuts in 2025, bond yields and mortgage rates are likely to increase. But if he points to ongoing policy easing in the coming months due to tariff-induced growth risks, mortgage rates could go down. "Tariffs add inflation risk while simultaneously slowing demand; it's a policy nightmare for the Fed," said Rueth. Watch this: 6 Ways to Reduce Your Mortgage Interest Rate by 1% or More 02:31 How does the Fed influence mortgage rates? The Fed sets and oversees US monetary policy under a dual mandate to maintain price stability and maximum employment. It does this largely by adjusting the federal funds rate, the rate at which banks borrow and lend their money. When the economy is in a slump or downturn, the Fed reduces interest rates to stimulate consumer spending and propel growth, as it did during the COVID-19 pandemic. In an inflationary environment, the Fed raises interest rates to slow economic growth. For example, the Fed raised its benchmark interest rate by more than five percentage points between early 2022 and mid-2023 to combat inflation by curbing consumer borrowing and spending. Altering the price of credit causes a slow domino effect on mortgage rates and the broader housing market. Banks typically pass along the Fed's rate hikes or cuts to consumers through longer-term loans, including home loans. Yet because mortgage rates respond to several economic factors, it's not uncommon for the federal funds rate and mortgage rates to move in different directions for some time. Read more: Why Labor Data Matters for Mortgage Rates and the Fed How will the Fed's future rate cuts affect mortgage rates? While the Fed's projections point to two cuts this year, with the first potentially coming in July, much is still uncertain. For the Fed to resume lowering interest rates, policymakers would need to see an ongoing decline in inflation or a rapid deterioration of the labor market. If unemployment spikes and the economy slows further, the Fed will likely be forced to implement more interest rate cuts. In that case, mortgage rates should gradually ease. Most housing market forecasts, which already factor in at least two 0.25% Fed cuts, call for 30-year mortgage rates to stay above 6% throughout 2025. Even if rates do fall during a recession, the housing market won't suddenly become affordable if families are grappling with high prices and job insecurity. Today's unaffordable housing market also remains plagued by limited inventory and steep home prices. What other factors affect mortgage rates? Mortgage rates rise and fall for many of the same reasons home prices do: supply, demand, inflation and even the employment rate. But your own personal mortgage rate also comes down to your individual finances, like your credit score and down payment, as well as the specific type and terms of the loan you pick. Policy changes: When the Fed adjusts the federal funds rate, it affects many aspects of the economy, including mortgage rates. The federal funds rate affects how much it costs banks to borrow money, which in turn affects what banks charge consumers to make a profit. Inflation: Generally, when inflation is high, mortgage rates tend to be high. Because inflation chips away at purchasing power, lenders set higher interest rates on loans to make up for that loss and ensure a profit. Supply and demand: When demand for mortgages is high, lenders tend to raise interest rates. This is because they have only so much capital to lend out in the form of home loans. Conversely, when demand for mortgages is low, lenders tend to slash interest rates to attract borrowers. Bond market activity: Mortgage lenders peg fixed interest rates, like fixed-rate mortgages, to bond rates. Mortgage bonds, also called mortgage-backed securities, are bundles of mortgages sold to investors and are closely tied to the 10-year Treasury. When bond interest rates are high, the bond has less value on the market where investors buy and sell securities, causing mortgage interest rates to go up. Other key indicators: Employment patterns and other aspects of the economy that affect investor confidence and consumer spending and borrowing also influence mortgage rates. For instance, a strong jobs report and a robust economy could indicate greater demand for housing, which can put upward pressure on mortgage rates. When the economy slows and unemployment is high, mortgage rates tend to be lower. Read more: Fact Check: Trump Doesn't Have the Power to Force Lower Interest Rates Is now a good time to get a mortgage? Even though timing is everything in the mortgage market, you can't control what the Fed does. "Forecasting interest rates is nearly impossible in today's market," said Wolf. Regardless of the economy, the most important thing when shopping for a mortgage is to make sure you can comfortably afford your monthly payments. More homebuying advice
