7 Truths and Myths about mortgage interest rates [MOST] agents aren’t telling you!

Today, we’re diving into one of the hottest topics in real estate right now: mortgage interest rates. You’ve probably heard a lot about the recent rate cuts by the Federal Reserve (Fed), but how much of that really affects your mortgage rate? Let’s break it down by addressing 7 truths and myths about mortgage rates that [MOST] agents aren’t talking about.

1. Truth or Myth: The Fed Rate Cut Directly Affects Mortgage Rates?

Myth ❌
Many people assume that when the Fed cuts interest rates, mortgage rates follow suit. But that’s not exactly true. While the Fed’s actions do impact the broader economy, mortgage rates are more closely tied to the bond market, not the Fed’s rate decisions. So, while the Fed’s influence is felt, they don’t directly set your home loan rate.

2. Truth or Myth: The Fed Chairman Won’t Predict Mortgage Rates?

Truth ✅
On September 18, 2024, Fed Chairman Jerome Powell made it clear that even he won’t predict where mortgage rates are headed. This is because mortgage rates don’t march in lockstep with the Fed’s rate cuts—they follow the bond market. So, when you hear about changes in the Fed rate, don’t assume mortgage rates will move in the same direction.

3. Truth or Myth: Falling Fed Rates Spark Buyer Interest?

Truth ✅
Absolutely true! Every time the Fed cuts rates, buyers start to pay more attention. In fact, when rates are in the news, many potential buyers who have been sitting on the sidelines get serious about entering the market. Right now, mortgage rates are trending downward, and more buyers are exploring their options. If you’ve been waiting for a better time to buy, now could be your moment.

4. Truth or Myth: Economic Predictions About the Fed’s Rate Cut Were Accurate?

Myth ❌
Economic experts were not sure how much the Fed would cut rates—whether by a quarter percent or half a percent. Predicting the Fed’s moves can be difficult, even for seasoned professionals. This kind of uncertainty can cause stress for buyers and sellers, which is why it’s so important to stay informed and make decisions based on your personal financial situation.

5. Truth or Myth: Inflation is Under Control, and the Fed is Now Focused on Preventing Recession?

Truth ✅
After months of battling inflation, the Fed now believes they have it under control and are shifting focus to prevent a recession. This is a significant reason behind the recent rate cut, and we may see more cuts aimed at stabilizing the economy. Lower rates could keep mortgage rates trending down, which is good news for potential homebuyers.

6. Truth or Myth: Lower Interest Rates Save Thousands on Mortgage Payments?

Both! 😀
Here’s where things get interesting. Mortgage rates have been steadily dropping since October 2023, when they peaked at around 7.9%. Fast forward to September 2024, and rates are at about 6.09%. For a median-priced home in the U.S., that means your monthly mortgage payment could be around $2,075, compared to $2,440 in October 2023—saving you approximately $365 each month. That’s a significant savings that can increase your purchasing power by up to $75,000, depending on the price point of your home.

However, the total savings you’ll enjoy depends on the price of your home. The higher the home price, the more you’ll save in the long term.

7. Truth or Myth: Lower Interest Rates Could Bring More Sellers to the Market?

Truth ✅
With rates dropping, we might see more homes hitting the market soon. Many homeowners locked into low interest rates during the COVID period have been hesitant to sell. However, with rates becoming more manageable and buyer interest increasing, these homeowners might finally feel like it’s time to make a move. This could lead to more inventory, which is great news for buyers!

In Conclusion
There you have it—seven truths and myths about mortgage interest rates that most agents aren’t talking about. From what the Fed’s moves really mean to how much you can save right now, it’s clear that the market is shifting. If you’ve been thinking about buying or selling, now could be a great time to act.