A while back, I declared that we were in a falling mortgage rate environment.
Perhaps I said it too early, but the general thought was mortgage rates peaked at around 8% in late 2023 and have been moving down ever since.
Did they move lower every day? Or every week or every month? No, of course not.
Mortgage rates, like all other things, don’t move in a straight line up or down.
But if you zoom out they’ve been trending lower as opposed to higher since then and despite the past couple days, could well continue that move lower.
The Path Forward for Mortgage Rates All Depends on the Economic Data
Whether or not mortgage rates continue to make their way down will be dependent on the economic data ahead of us.
While the Fed gets together eight times a year and makes the occasional rate decision, it is the economic data that is released every week that truly matters.
It’s what drives the Fed policy to begin with, and what underpins consumer mortgage rates.
So if we want to know what’s next for mortgage rates (we all do, right?), we have to keep looking at the data.
And we don’t need to get hung up on one Fed policy decision and what it leaves in its immediate wake because chances are it’ll be a blip in the grand scheme of things.
What matters more is the trajectory of the economy, which will determine if interest rates can come down more, remain flat, or even turn higher again.
In the meantime, we have to digest an awful lot of noise from the Fed and Powell’s press conference.
And the usual quips about mortgage rates being higher after a Fed rate cut.
But it always ignores all the movement that took place prior to the cut. Does anyone remember that mortgage rates fell about a half point in the past month?
Or that mortgage rates were in the 7s earlier as recently as late May?
Do they know mortgage rates are hovering close to three-year lows, despite the expected setback of the past couple days?
And even with the setback, which could very well be temporary, mortgage rates remain super attractive relative to recent levels?
Will the Move Higher Since the Latest Cut Be Short-Lived?
I noted yesterday that mortgage rates often defy the Fed, that is to say, they move in the opposite direction on the day of a cut or hike.
For example, the Fed cut yesterday and rates went up. The many times they hiked over the past few years, mortgage rates went down.
The one time they fell on the same day as a Fed rate cut was back in November, when rates saw a 15-bp swing lower, similar to the amount of today’s move higher.
But keep in mind mortgage rates had risen about a full percentage point in the two months prior, so they may have just blown off some steam.
Also note that they continued to rise shortly afterward. So the relief was short-lived.
Perhaps this move up will also be short-lived and rates will continue their downward trend once the dust settles.
We might be looking at the opposite of what we saw when rates were rising.
Instead of seeing periods of relief lower, we might be pullbacks higher. After all, you can’t just go down in a straight line.
Just like we didn’t go up in a straight line when mortgage rates ascended from sub-3% to 8% in less than two years.
But like back then, it will depend on the data, namely labor and inflation!
The past few years, we were struggling with inflation and couldn’t seem to get ahead of it.
Once we finally did, labor was coming in too hot and making it difficult for the Fed to cut with conviction.
They eventually did cut (nine months later) after labor finally seemed to break, so if that continues, this will likely be a blip on the chart above.
And if inflation also stays under control, even if we get the odd warm report, mortgage rates will likely keep moving lower.
That’ll make these past couple days completely forgettable in an otherwise obvious downtrend.
Read on: 2025 Mortgage Rate Predictions
Before creating this site, I worked as an account executive for a wholesale mortgage lender in Los Angeles. My hands-on experience in the early 2000s inspired me to begin writing about mortgages 19 years ago to help prospective (and existing) home buyers better navigate the home loan process. Follow me on X for hot takes.
