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Will mortgage rates settle after the election ends and the Fed meets?

Didier Malagies • November 6, 2024


It’s a big week for the U.S. economy as the 2024 election takes place and monetary policymakers are meeting to decide what to do next about interest rates.


For mortgage professionals who’ve been dealing with uncertainty of late, more clarity could soon emerge. Mortgage rates have been rising quickly in recent weeks, dashing hopes for growth across the purchase and refinance lending channels.


According to HousingWire’s Mortgage Rates Center, the average 30-year conforming rate stood at 6.88% on Tuesday. This figure has jumped 16 basis points (bps) over the past week, 26 bps in the past two weeks and 57 bps since Sept. 18, when the Federal Reserve cut benchmark rates by half a percentage point.

The average 15-year conforming rate, meanwhile, grew to 6.55% on Tuesday — up an eye-popping 27 bps in one week. Conditions aren’t expected to improve in the short term, according to HousingWire Lead Analyst Logan Mohtashami.


“Mortgage rates are heading higher unless the spreads are fantastic today,” he wrote Tuesday. “The election data will create some wild swings, but the ISM (Institute for Supply Management) service report was a big beat of estimates, which made yields higher this morning after the report was released.”


Some help is expected Thursday in the form of another Fed rate cut. According to the CME Group’s FedWatch tool, about 95% of interest rate traders believe the federal funds rate will be lowered by 25 bps. And there is a 77% chance of another 25-bps cut in December, which would bring the overnight rate to a range of 4.25% to 4.5%.


“Assuming a 25-basis point cut in November, the September FOMC projections imply one additional quarter-point cut in December,” Sam Williamson, senior economist at First American, said in a statement. “However, additional upside surprises on inflation or employment data could influence the Fed to consider taking the December cut off the table. In contrast, accelerated economic weakness or a rapid slowdown in inflation could prompt the Fed to take a more dovish approach to policy normalization.”


While Tuesday is Election Day, the results of the presidential race between Kamala Harris and Donald Trump may not be known immediately. The contest is expected to be extremely close and is likely to be decided by a handful of battleground states, including Arizona, Georgia, Michigan, North Carolina, Pennsylvania and Wisconsin.


The presidential race, along with control of the House of Representatives and the Senate, could also factor into interest rate movements in the short term.


Survey data released Tuesday by Redfin found that 38% of early voters factored housing affordability into their choice between Harris and Trump. About one-third of respondents believe that rates will decline during a Trump presidency, compared to one-quarter who think the same under Harris. And more respondents believe rates will rise under Harris (32%) versus Trump (28%).


ICE Mortgage Technology reported this week that lower interest rates during the third quarter led to higher levels of home equity lending. Home equity withdrawals across both second-lien mortgages and cash-out refinances reached a two-year high mark in Q3 2024.


But even with a collective $48 billion in originations for these two categories from July through September, ICE reported that U.S. homeowners are touching only 0.42% of their tappable equity — the amount they can borrower against while keeping a 20% equity stake in the home.


The 10-year average extraction rate is 0.92%. Second mortgages are 26% below their historic utilization rate, while cash-out refis are 69% below normal.


ICE noted that “elevated interest rates have been a deterrent to homeowner equity utilization in recent quarters, as 30-year mortgage rates climbed at times into the high 7% range, curtailing cash-out refinance activity, and the average introductory rate on second lien home equity lines of credit (HELOCs) rose above 9.5%.”


If Fed policymakers continue on their rate-cutting path, however, this could make home equity loan products “more affordable and more attractive,” ICE concluded.



“Since the Fed began its latest cycle of rate hikes, the monthly payment needed to withdraw $50K via a HELOC more than doubled, from as low as $167 per month back in March 2022 to $413 in January of this year,” Andy Walden, the company’s vice president of research and analysis, said in a statement.



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By Didier Malagies November 20, 2024
The trend line for mortgage rates has been the same for several weeks, even as some of the uncertainty surrounding the 2024 election is fading. The cost of a home loan continues to move in a negative direction for U.S. consumers and housing professionals alike as the downward movement that started in August has been erased entirely. At HousingWire’s Mortgage Rates Center on Tuesday, the average rate for 30-year conforming loans was 6.99%. That was up 4 basis points (bps) from a week ago and 75 bps higher than when rates bottomed out in late September. Meanwhile, the 15-year conforming loan rate — which had been as low as 5.57% less than two months ago — stood at 6.98% on Tuesday.  The pace of increases is moderating. “Mortgage rates are expected to be lower today as bond yields have been decreasing throughout the night and early morning, slightly dropping further following the recent softer housing starts data,” HousingWire Lead Analyst Logan Mohtashami wrote on Tuesday.
By Didier Malagies November 18, 2024
Homebuyers who are part of Generation X — primarily born between the mid 1960s and the early 1980s — should keep accessibility features in mind as they approach retirement, since Americans are increasingly looking to age in place in their own homes once their time in the workforce is complete. This is according to a recent article at the Boston Globe that took a closer look at the kinds of homes that those currently in their mid-to-late 50s may want to prioritize as they look to the future. Not only is it a good idea to think ahead for themselves, the article explains, but many members of Gen X are also a part of the so-called “sandwich generation” where they may be taking care of both their own children, and their parents simultaneously. “So for those considering moving out of the homes where they raised their children, there are some key boxes to check to make living in their next house easiest for everyone,” the story said. The biggest aspect to keep in mind is the one that could make the biggest accessibility difference, and that is keeping the house confined primarily to a single floor. “In most of our remodeling, we use a design technique called Universal Design,” said Brian Harvey, owner of Boston-area business Harvey Home Modifications . “That essentially is a design that will serve anyone of any physical capability in the house.” Keeping in mind what is not needed is also a useful exercise, he said, and ensuring that door frames are wide enough to accommodate wheelchairs could be beneficial for any current or future wheelchair users that do, or will, reside in the home. Bathrooms are also a major focus, since they can often serve as common sites for falls or other accidents since slippery, wet surfaces can be easy to find. “If the home you’re hoping to buy doesn’t have the accessibility you’re looking for, you’ll want to check with a contractor to see what kind of renovations are possible,” the story said. One of the ways the reverse mortgage industry has aimed to position the potential value proposition for prospective borrowers is by the ability to use the loan proceeds to fund home modifications. The U.S. Department of Housing and Urban Development (HUD) has also given attention to home modifications specifically for aging in place. This past summer, the department greenlit a new round of grant funding specifically to assist more older Americans with aging in place.  Reporting earlier this year by the Associated Press (AP) also tracked the increasing desire of older Americans to remain in their homes for longer, illustrating how they were increasingly “splurging” on home modifications to better fashion their living spaces for later life’s natural mobility limitations. Home improvement retailers have also taken notice, with The Home Depot refreshing an in-house brand with accessibility in mind for things like grab bars and easier-to-use faucets. In 2021, Lowe’s established a single stop for items including wheelchair ramps and shower benches, the AP reported.
By Didier Malagies November 18, 2024
When a property appraisal comes in lower than the agreed-upon purchase price, it can complicate financing for the buyer. Here's what typically happens for FHA, Conventional, and VA mortgages: 1. FHA Mortgages Impact of a Low Appraisal: The loan amount is limited to the lower of the purchase price or the appraised value. A low appraisal means the buyer must: Renegotiate the purchase price with the seller. Pay the difference in cash. Walk away if the contract allows it. Required Repairs: FHA appraisals assess both value and property condition. If issues arise (e.g., safety concerns), the seller or buyer must make repairs before closing. Appraisal Stays with the Property: FHA appraisals are tied to the property for 120 days. If a different FHA buyer comes along within that period, they inherit the appraisal value. 2. Conventional Mortgages Impact of a Low Appraisal: Conventional loans also limit the loan amount to the appraised value. If the appraisal is low, the buyer must: Negotiate a lower price with the seller. Increase their down payment to cover the gap. Cancel the deal if allowed by a financing contingency. Appraisal Appeal or Second Appraisal: Buyers or lenders can challenge the appraisal or request another one if there’s evidence the appraisal was inaccurate. More Flexibility: Conventional loans often have fewer property condition requirements than FHA or VA loans, so the appraisal focuses more on market value. 3. VA Mortgages Impact of a Low Appraisal: VA loans use a Notice of Value (NOV) to determine the property’s worth. If the NOV is lower than the purchase price, options include: Negotiating a price reduction with the seller. Paying the difference in cash. Requesting a "Reconsideration of Value" (ROV) through the VA if there’s a strong case for higher value. VA Escape Clause: VA loans include a clause allowing buyers to walk away if the property appraises lower than the purchase price without forfeiting their earnest money deposit. Minimum Property Requirements (MPRs): If the property doesn't meet VA MPRs, repairs are required before closing. General Buyer Options in Case of a Low Appraisal: Renegotiate Price: Sellers may agree to lower the price to match the appraisal. Bring Extra Cash: Buyers can cover the gap out-of-pocket. Challenge the Appraisal: Provide additional data to support a higher value. Walk Away: Utilize financing or appraisal contingencies to exit the deal. Would you like more details on how to handle a specific type of mortgage? tune in and learn at https://www.ddamortgage.com/blog didier malagies nmls#212566 dda mortgage nmls#324329
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