What to Expect from the September 18, 2024 Federal Reserve Meeting: Mortgage Rate Predictions

Military members and their families face unique housing challenges due to the frequent relocations associated with military life. Staying informed about housing trends and mortgage interest rates is crucial, as these factors can significantly impact their ability to find affordable homes, build equity, and secure favorable financing.

With each move, service members must navigate different housing markets, often with little time to plan. By keeping up with the latest market conditions, military families can make informed decisions, whether buying, selling, or refinancing, ensuring they maximize their homeownership benefits, such as VA loans, and maintain financial stability through constant transitions.

Federal Reserve Meeting – September 18, 2024

As we approach the highly anticipated Federal Reserve meeting on September 18, 2024, homeowners, prospective buyers, mortgage loan officers, and real estate professionals are all asking the same question: What will happen to mortgage rates?

In the lead-up to the meeting, mortgage rates have already begun to dip, influenced by anticipation of a rate cut and weaker economic data. Over the past year, rates have dropped significantly, with the 30-year fixed-rate mortgage now averaging around 6.29%—the lowest since February 2023, according to the Mortgage Bankers Association. However, it’s important to understand that the Fed’s actions don’t directly set mortgage rates. Instead, mortgage rates are influenced by a variety of factors, including market forecasts.

Mortgage rates tend to reflect market expectations of what the Fed might do. If the Fed implements a significant rate cut as anticipated, mortgage rates may continue to drop. On the other hand, if the Fed doesn’t deliver the expected cut, we could see rates rise. Ultimately, mortgage rates are shaped by what the market anticipates the Fed will do with interest rates.

While the Federal Reserve’s decisions strongly influence mortgage rates, there is no guarantee that rates will fall immediately following the September 18 meeting. The Fed’s decisions on the federal funds rate impact short-term interest rates, which can affect broader economic conditions and, subsequently, mortgage rates.

What we are anticipating will happen to Mortgage Rates:

The highly anticipated Fed meeting will be held September 18, 2024 and economists are expecting a rate cut of 0.25-0.5 percentage point reduction. This could be good news for potential homebuyers or those with higher interest rates on their current home as it will be the first time in four years that the Fed has cut rates.  

The September 18th Federal Reserve meeting and any potential rate cuts could have significant effects on the housing market.

Here’s how:

1. Mortgage Rates: While the Fed doesn’t directly control mortgage rates, its decisions on the federal funds rate impact the broader economic environment. If the Fed cuts rates, it may lead to lower mortgage rates, as lenders adjust their offerings based on anticipated economic trends. Lower mortgage rates make borrowing more affordable, which could boost home buying activity.
2. Homebuyer Demand: A rate cut could spur increased demand in the housing market. With lower borrowing costs, more people may find homeownership more accessible, leading to greater competition among buyers and potentially driving home prices higher.
3. Refinancing Opportunities: If mortgage rates drop following the Fed’s decision, homeowners with higher-rate loans may look to refinance to lock in lower payments. Refinancing activity often spikes when rates fall, as it allows homeowners to reduce their monthly costs.
4. Housing Affordability: Lower rates improve affordability for prospective buyers by reducing monthly mortgage payments. However, if demand increases too quickly, it could offset these savings through rising home prices, particularly in tight markets with limited housing inventory.
5. Economic Uncertainty: The Fed’s decision will also signal its outlook on the economy. If a rate cut is accompanied by concerns about a slowing economy, it might temper housing market enthusiasm, as potential buyers grow more cautious about their financial future.

The Fed’s actions can indirectly lower mortgage rates, increase buyer demand, and improve refinancing opportunities, but broader economic conditions will also play a role in shaping the overall impact on the housing market.

What should homebuyers and homeowners do?

For those looking to buy a home, the days leading up to and following the September 18th Fed meeting could be a critical window to watch. If the Fed holds rates steady, mortgage rates could stabilize, offering a more predictable environment for buyers. In that case, locking in a rate sooner rather than later could be a smart move.

If you’re a current homeowner considering refinancing, pay close attention to any shifts in mortgage rates after the meeting. Even a small decrease in rates could present an opportunity to refinance at a better rate, especially if you’ve been waiting for rates to fall before making a move. 

Homeowners with mortgages over 7% may also want to consider refinancing to a lower rate. For example, refinancing a $400,000 mortgage from 7.8% to today’s rate of about 6.3% could save around $400 a month.

“Lenders generally recommend refinancing when there’s a difference of 1 percentage point or more,” noted Smart Money’s Rathner.

If you currently have a VA Home Loan, you can learn more about refinancing that loan to a lower interest rate through the VA IRRRL program. Learn more about this program here. 

Final Thoughts

All eyes will be on the Federal Reserve on September 18, 2024. While no one can predict with absolute certainty what will happen, the outcome of the meeting will likely influence mortgage rates and the broader housing market. 

As always, it’s essential to work closely with your mortgage lender to understand how changes in the market could affect your personal financial situation and homeownership goals.

If you have questions about the Fed’s decision or how it might impact your mortgage, feel free to reach out for personalized advice tailored to your needs.

Visit The Bridge Real Estate Network to connect with our partner lender.