From CNBC: 2024-12-21 08:00:01

In 2024, the Federal Reserve cut interest rates three times, but mortgage rates may not fall as quickly as some Americans hope. Experts predict rates to hover around 6.5-7% due to long-term borrowing rates for government debt and potential fiscal policies in 2025.

Economists at Fannie Mae suggest that the Fed’s management of mortgage-backed securities impacts current mortgage rates. The Fed’s use of quantitative easing during the pandemic led to record-low rates in 2021, benefiting home buyers and owners looking to refinance.

In 2022, the Federal Reserve initiated quantitative tightening to reduce its asset holdings, potentially increasing the spread between mortgage rates and Treasury yields. This decision may contribute to mortgage rates moving in the opposite direction of the Fed’s intentions, according to experts.

Experts highlight the impact of the Fed’s decisions on mortgage rates, emphasizing the complexities of quantitative easing and tightening. Understanding these processes can help individuals anticipate changes in mortgage rates and make informed decisions regarding home buying or refinancing.

Read more: How the Federal Reserve’s rate policy affects mortgages