So the Federal Reserve just cut its key interest rate by 50 basis points. But where does that leave us, the poor souls stuck in a housing world that feels a lot like purgatory? It’s kind of complicated, but what you need to know in 10 seconds or less is that while mortgage rates probably won’t plummet on the spot, lower rates are coming.
Let’s take a step back for a moment to fully understand the situation at hand. Inflation reached a four-decade high two summers ago; the Fed was already raising interest rates and only got more aggressive. Mortgage rates, which were hovering near all-time lows, soared, and the housing market froze: people stopped buying and selling homes. After hearing that, you might think an interest rate cut would translate to a drop in mortgage rates, but the federal funds rate isn’t directly connected to mortgage rates. It’s the 10-year treasury mortgage rates pair with, and the spread between the two is higher than usual.
