What the September Fed rate cut means for mortgage rates

Core Points - The Federal Open Market Committee (FOMC) voted to cut rates by 0.25% in response to weak employment data and high inflation [1] - Mortgage rates do not always follow the Fed's rate changes, as evidenced by previous rate cuts leading to higher mortgage rates [2] - The recent mortgage rate decline is attributed to broader economic concerns rather than direct Fed policy [6] Group 1: Federal Reserve Actions - The rate cut is seen as a tactical step towards a neutral policy rather than a significant shift [3] - The decision was not unanimous, with some members advocating for a larger cut [3] Group 2: Mortgage Rate Trends - Mortgage rates fell to a three-year low of 6.13% ahead of the Fed meeting, with a notable drop from 6.50% to 6.35% in the previous week [4] - The recent decline in mortgage rates has led to a significant increase in purchase applications, marking the highest year-over-year growth in over four years [5] - Despite the recent drop, mortgage rates remain above the sub-3% levels seen during the pandemic [5] Group 3: Economic Indicators - Weakening employment data has been identified as a catalyst for the recent drop in mortgage rates [6] - The August employment report indicated a slowdown in job growth and downward revisions of prior months' gains, contributing to concerns about the labor market [7]