Market Update: Rates Trend Lower After Fed’s Rate Cut Predictions; Home Prices Reach New High

Blog posted On March 26, 2024

The Federal Open Market Committee (FOMC) voted to leave the benchmark interest rate untouched last week. Following the news, mortgage rates trended lower. Read why.

Last week’s rate movement

First, the Fed doesn’t directly set mortgage rates. The federal funds rate is just a general benchmark number for the cost of borrowing money. What impacts mortgage rates more is the strength of the bond market. Generally, the stronger the bond market, the lower the mortgage rate trends.

In the most recent Fed meeting, the bond market wasn’t really focused on the Fed’s decision to leave rates unchanged. Instead, it had its sights set ahead for future rate cut projections. “In not so many words, those projections retained the Fed's previous expectation of 3 rate cuts by the end of this year, albeit by a smaller margin than the last round of projections in December,” wrote Matthew Graham of Mortgage News Daily. “This was a bit more hopeful than markets expected. As such, bonds improved, and mortgage rates fell.”

This morning’s home price news

• The FHFA home price index posted a month-over-month decline of 0.1% in January
• The 20-city Case-Shiller home price index posted a month-over-month increase of 0.1% in January

The monthly 20-city Case-Shiller increase brought the index’s levels to a new high. “Home prices in the 20 biggest U.S. metros hit a new high as the housing market deals with an ongoing lack of homes for sale,” noted MarketWatch.

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Sources: Bloomberg, MarketWatch, Mortgage News Daily