The Fed’s Federal Open Market Committee (FOMC) announced Wednesday a half-of-a-percentage point cut to the federal funds rate, dropping it to 4.75% - 5.00%.
This is the first time the FOMC has cut the federal funds rate since March of 2020 at the onset of the COVID-19 pandemic. Over the past four years, the federal funds rate has risen 525 bps from 0% - 0.25% to 5.25% - 5.50%. To curb inflation, the Fed has held the current federal funds rate steady since July of 2023.
Why did the Fed cut the federal funds rate?
The FOMC has a target of 2% inflation and has been keeping the federal funds rate unchanged at 5.25% - 5.50% since July of 2023 to achieve that goal. During their regularly scheduled meetings, the group looks at economic data such as monthly Consumer Price Index reports to track inflation.
With inflation numbers inching closer to a 2% target over recent months, Fed Chairman Jerome Powell made it clear that the committee felt comfortable reducing the federal funds rate a half-of-a-percentage point.
Some economists expected a more conservative, quarter-of-a-percentage point cut, but the FOMC stated “In light of the progress on inflation and the balance of risks, the Committee decided to lower the target range for the federal funds rate by 1/2 percentage point to 4-3/4 to 5 percent.”
When will mortgage rates go down?
Those keeping an eye on the housing industry have been wondering how this recent Fed rate cut will impact mortgage rates. When will mortgage rates go down?
Mortgage rates have already been on the decline, with anticipation of the recent federal funds rate cut already a contributing factor. With three more Consumer Price Index releases and two more FOMC meeting dates ahead before the end of the year, the outcomes of these meetings will determine how mortgage rates may continue to decline.
What are mortgage rates today?
Mortgage News Daily reported 30-year fixed mortgage rates near 7% for the first half of 2024, down from a peak of 8.0% in October 2023.
Mortgage rates started to decline further into the second half of the year. Positive numbers from monthly CPI reports and encouraging news from FOMC meetings have led to lower rates. Ahead of the September Fed rate cut, mortgage rates had fallen to the low 6% range. There have not been comparable numbers that low since early 2023.
For up-to-date information on mortgage rates today, Mortgage News Daily provides daily updates to the 30-year fixed mortgage rates. This reference includes updates from Freddie Mac, Mortgage Bankers Association, and FHFA.
Ready To Start?
Take the first step toward achieving your financial goals — apply now to get started!
How to benefit from lower mortgage rates
Higher mortgage rates have left some homebuyers and homeowners feeling sidelined from the real estate market. With mortgage rates falling, there are multiple opportunities available depending on their unique financial situation.
Homebuyers increase their purchasing power
Lower mortgage rates may allow homeownership to feel closer within reach for those hoping to buy a home. Benefits include:
- Lower monthly payments: With reduced interest rates, homebuyers can secure lower monthly mortgage payments, making homeownership more affordable.
- Boosted purchasing power: Lower rates mean buyers can afford a larger loan for the same monthly payment, giving them more flexibility in choosing a home that fits their needs.
- Lower total interest: Over the life of the loan, a lower interest rate significantly reduces the total amount of interest paid, saving homebuyers thousands of dollars in the long run.
- Easier qualification: With lower rates, monthly debt-to-income ratios decrease, potentially making it easier for some buyers to qualify for a mortgage.
Homeowners refinance or tap into home equity
An existing homeowner who has been delaying a new purchase due to mortgage rates may now be ready to enter the housing market. In addition to looking for new properties, homeowners can also benefit from:
- Refinance their rate: Take advantage of lower rates to refinance their current mortgage, reducing their monthly payments or shortening the term of their loan without a significant increase in payment.
- Access to cash: Use a cash-out refinance to take advantage of lower rates, tapping into their home’s equity for major expenses or to consolidate higher-interest debt.
- Increase home equity: Lower interest rates mean more of each payment goes toward paying down the principal balance, helping homeowners build equity more quickly.
Ready To Take The Next Step?
Whether you're buying a new home or refinancing, we're here to help.
Final thoughts
The recent Fed rate cut has been a positive sign for those hoping to buy a home, refinance or tap into their home equity. Upcoming CPI report releases and FOMC meetings will continue to provide guidance on how mortgage rates may fluctuate through the end of the year.
Getting in touch with a local mortgage lender to discuss your unique financial situation and understand how falling mortgage rates could benefit you.