‘It’s nuts right now:’ Arizona homebuyers hopeful for relief after Fed’s rate cuts

PHOENIX (AZFamily) — The Federal Reserve cut interest rates Thursday for the second time in the past three months. But many Arizona homebuyers are asking how soon they’ll see relief in mortgage loans.

With inflation down, the Fed is slowly bringing the key rate down from their four-decade highs.

Mortgage rates typically drop when interest rates are cut. But the cost of a new home loan is going up, which is confusing and frustrating for potential homebuyers.

Economic expert John Wake says interest rates are just one-factor lenders consider when determining mortgage rates.

A 30-year fixed rate is still lower than it was this time last year, but it is still too high for future buyers.

“Usually, when they cut the rate, it means mortgage rates go down,” Wake said. “It’s nuts right now.”

He says that though many were hoping for mortgage rates to fall along with interest rates, there’s a reason that didn’t happen: lenders anticipated it.

“A lot of people expected them to lower the rates, and so when they did, they already included that in where their rates would go, so they didn’t go down as much,” Wake said.

This is the second rate cut in the past three months. The interest rate now ranges from 4.5% to 4.75%. Meanwhile, mortgage rates are 6.8%, up from 6.1% in September.

“Nevertheless, mortgage rates are a full percentage lower than they were a year ago at this time. So they’re not as bad as they were.” Wake said.

Wake says lenders use other factors to calculate mortgage rates, like unemployment and inflation, making it complex and nuanced. In fact, there’s really only one thing he says that guarantees that mortgage rates drop: “If you go into a recession, mortgage rates will go down. You may not have a job, but nevertheless, mortgage rates will go down. The economy is pretty good. People kept thinking we are going into a recession, and that would be good for housing and rates, but that’s not what happened.”

But what do the mortgage rates mean for the housing market?

“The market is terrible for first-time home buyers right now,” Wake said. He also says it is difficult for sellers.

“When your mortgage rate is three percent or less on the home you have now and 6 percent on the home you want, that is a huge difference in monthly payment,” Wake said.

Wake does say, though, that the Valley’s housing situation is unique because there are more people moving here than in other parts of the country, which keeps prices high and the market strong.

As for combating the mortgage rate, he says you can buy and re-finance, or consider adding to your current home if you need more space.

See a spelling or grammatical error in our story? Please click here to report it.

Do you have a photo or video of a breaking news story? Send it to us here with a brief description.

Copyright 2024 KTVK/KPHO. All rights reserved.