Why Fed Rate Cuts Aren’t Making Mortgages Cheaper

Federal Reserve interest rate decision can affect the cost of mortgages. But that link from the Fed to your monthly payment isn’t direct. Fed decisions affect the investors demand for debt products like treasury bills and mortgage-backed securities. The shifting demand will, in turn, affect the rates Americans pay for new mortgages. Meanwhile, the Fed is reducing its holdings of debt, which it accrued during recent economic emergencies. That reduction in the Fed's assets, particularly mortgage-backed securities holdings, could keep upward pressure on mortgage rates. The upward pressure may keep rates elevated even as the Fed reduces the federal funds rate heading into 2025.

Chapters:
01:13 Chapter 1 - Mortgage rates
04:08 Chapter 2 - Treasury yields
05:56 Chapter 3 - Quantitative tightening
07:43 Chapter 4 - The outlook

Produced, Shot and Edited by: Carlos Waters
Additional Camera: Nathaniel Lee, Charlotte Morabito
Senior Producer: Shawn Baldwin
Graphics: Christina Locopo
Additional footage: Federal Reserve, Getty Images
Additional sources: BNL Appraisal, The Brookings Institution, Federal Housing Finance Agency, Federal Reserve Bank of Dallas, Federal Reserve Bank of Kansas City, Federal Reserve Bank of St. Louis, ICE Mortgage Technology, Mortgage Bankers Association, Peter G. Peterson Foundation, SmartAsset

About CNBC: From 'Wall Street' to 'Main Street' to award winning original documentaries and Reality TV series, CNBC has you covered. Experience special sneak peeks of your favorite shows, exclusive video and more.

Connect with CNBC News Online

#CNBC
#fed
#interestrates

Why Fed Rate Cuts Aren’t Making Mortgages Cheaper

[MrHavk]

The younger generation lost by not buying up all the foreclosed houses when they were in Kindergarten. Damn them wanting to go outside and play instead!!!

[Andres_]

The problem is that mortgage rates don’t just follow Fed rate cuts directly. They’re influenced by other factors like bond yields, market demand, and even lender margins. Right now, inflation and market volatility are playing a huge role in keeping those rates higher than we’d expect.

[jeremiahm]

Remember how we were told ALL YEAR "once the Fed starts trimming rates, mortgage rates will go down!!!" - yeah...about that.

[MaxVids]

Ugh, $1, 373 a month vs $2, 222 hurts a lot.

[thisfoxgames]

The damage has been done, nobody is going to lower the asking price on their home. Half a million for what can be considered a started home is ridiculous.

[_TheDeanMachine]

Get corporations out of home ownership

[keithmenzer]

It’s no mystery. None at all.

It’s greed. Record corporate profits across the board while the middle and lower class is struggling with inflation and price increases. It’s a massive redistribution of wealth, from us to CEOs.

[Linette-g-y]

If sellers must sell, home prices will have to decline, and lower evaluations will follow. However, people will have to accept ''reality'' that we won't ever return to 3%. I now look towards the stock market to fuel my millionaire goal. Sure I'm not alone in my chain of thoughts.

[BrewerVera]

First mortgages with rates of 8 to 9% and 9% to 10% were common when I bought my first house to live in, which was in Miami in the early 1990s. People will have to come to terms with the fact that we may never get back to 3%. Home prices will have to drop if sellers are forced to sell, and appraisals will drop as a result. I'm very certain that I'm not the only one thinking this.

[jonathantaylor]

Home's don't FEEL unaffordable... they ARE unaffordable. This is what happens when a feckless Central Bank prints and buys trillions of dollars of government debt to artificially drive down interest rates. The entire RE market got repriced when you could get a 30 year mortgage for 2.85%. Of course mortgage rates are going up- investors aren't stupid and they are legitimately worried about future inflation and don't want to get paid back in confetti. Longer dated debt, 10+ years could care less about the FED's stupid Federal Funds Rate.. that is 24 hour debt with zero duration risk. Longterm and short-term debt are entirely different markets. Mortgage rates are going higher.

[MrHavk]

The record high number of cash purchases is due to CORPORATE BUYING!! The average person can barely come up with the down payment today, let alone pay all cash.

[hughsx]

Am 58 retiring next year but the thought of retirement gives me weakness. My apologies to everyone who have retired and filing social security during this time after putting in all those years of work just to lose everything to a problem you never imagined to happen. It’s so difficult for people who are retired and have no savings or loved ones to fall back on. what's the best way to grow my income.

[ddcd]

I feel fortunate. I locked in at 2.75 but by the time my mortgage close it was 2.9. I'd be paying over $1000 more a month if I had to do it today.

[viviancarolgioao]

The Federal Reserve halted rate hikes, which is a very bold move by the Fed to stimulate economic expansion, ease financial conditions and address inflation concerns with potential benefits for consumers. The major concern for me and I believe every other investor is on opportunities present in the market to enhance overall portfolio performance

[AnnDiageon]

I planned on buying properties in LA in 2025 due to their high value returns, but with the ongoing fire catastrophe, I think I will go for stocks instead. Can anyone recommend the best stocks to buy that can give similarly high returns this year?

[sewprosper]

I was blessed enough to have gotten my home in the middle of the pandemic at 3.2%. Unless rates go below that ever again, I am sitting right here.

[sarawilliam]

Honestly, this situation makes me feel uneasy, particularly with the Fed's decision to cut interest rates by 25 bps. It indicates deeper economic concerns, and I'm uncertain about my $130K investment strategy, especially with the possibility of not just a recession but potentially a depression.

[thedman]

This is a supply side issue that is being exacerbated by both individual and corporate greed. You can’t have affordable housing when you have a bunch of corporations buying up large swaths of affordable homes and outbidding single buyers. That just makes a bad issue worse because we already have an issue with individual investors owning 10, 20+ properties and becoming rent seekers. Pair that with an environment where existing home owners do everything they can to prevent new construction of homes to protect their home values and you have an environment with high rates and incredibly limited supply, ridiculous housing prices, and an environment with incredibly low mobility

[tonysilke]

Mortgage rates are currently at an all time high since 2000(24 years) and based on statistics on inflation, we might see that number skyrocket further, a 30-year fixed rate was only 5% this time last year, so do I just keep waiting for a housing crash before buying or redirect my focus to the equity market

[EdwinNaranjo-Valles]

My parents bought a house in 2012 when their mortgage was going to be $2, 200 compared to them paying $1200 a month for rent. Over ten years on the mortgage is half that and rent is now more expensive than when they bought their house.

It’s worth it to buy a home so long as you can reasonably afford it