In a recent video, Tom Lytton, FineMark’s Chief Credit Officer, talked about the relationship between Federal Reserve (Fed) rate adjustments and mortgage rates. When asked whether mortgage rates will follow suit when the Fed reduces rates, Lytton emphasized that the Fed’s actions do not directly dictate mortgage rates. He explained that mortgage rates are influenced by various factors such as economic conditions, the ten-year bond market, and mortgage-backed securities traded in the bond market. While the cost of funds can impact lending rates, it is just one component in the larger picture. Overall, as the Fed decreases rates, consumer rates are expected to decline across the board, although not necessarily in direct alignment.
When asked about potential rate reductions, Lytton acknowledged predicting exact figures is tricky. He suggested that while mortgage rates may remain stable or experience some decline, they are unlikely to mirror the rate cuts by the Federal Reserve.
Lytton when on to discuss the historically low rates we’ve experienced in recent years and when they may return. He noted that current rates are much more ‘normal’ than people remember. He said people tend to forget the extreme fluctuations witnessed in the past. With memories of exorbitant mortgage rates in the late ’70s, Lytton cautioned against expecting a regression to the exceptionally low rates of recent years. Describing today’s rates as relatively normal, he highlighted that a mortgage rate around 6-8% is typical for 30-year mortgages in historical contexts.
For potential homebuyers seeking advice on when they should buy, Lytton recommended making informed decisions based on personal circumstances rather than solely banking on rate changes. He emphasized that drastic rate drops are improbable without significant external economic factors and advocated for thoughtful decision-making in the current market climate.
