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Why Seattle Mortgage Rates Could Continue To Decline


December 29, 2023


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When reading about the housing market, you often encounter information about inflation and recent decisions by the Federal Reserve (the Fed). But how do those two things impact you and your homebuying plans? Here’s what you need to know.

The Federal Funds Rate Hikes Have Stalled

One of the Federal Reserve’s main objectives is to curb inflation. To achieve this, they initiated increases in the Federal Funds Rate to moderate economic growth. While this doesn’t directly determine mortgage rates, it does exert an influence.

In recent times, inflation has shown signs of moderating, indicating that the Federal Reserve’s rate increases have been effective in addressing and reducing inflation. Consequently, the Fed’s hikes have become less frequent and smaller, with no increases observed since July (see graph below):

The Federal Reserve, in its recent decisions, not only refrained from increasing the Federal Funds Rate during the last three committee meetings but also signaled the possibility of rate cuts in 2024. This suggests a potential shift in the central bank’s approach as it anticipates improvements in the economy and inflation. According to the New York Times (NYT):

“Federal Reserve officials left interest rates unchanged in their final policy decision of 2023 and forecast that they will cut borrowing costs three times in the coming year, a sign that the central bank is shifting toward the next phase in its fight against rapid inflation.”

This indicates the Fed thinks the economy and inflation are improving. Why does that matter to you and your plans to buy a home? It could end up leading to lower mortgage rates and improved affordability.

The Federal Reserve’s indication that it believes the economy and inflation are improving is significant for prospective homebuyers. This sentiment could translate into lower mortgage rates, ultimately enhancing affordability for individuals looking to buy a home.

Mortgage Rates Are Coming Down

Mortgage rates are subject to various factors, with inflation and the Federal Reserve’s actions playing a significant role. With the recent decision by the Fed to halt increases, there is a growing likelihood that mortgage rates will continue to trend downward (see graph below):

Although mortgage rates may remain volatile, their recent trend combined with expert forecasts indicate they could continue to go down in 2024. That would improve affordability for buyers and make it easier for sellers to move since they won’t feel as locked-in to their current, low mortgage rate.

Despite potential volatility, recent trends and expert forecasts suggest that mortgage rates could continue to decrease in 2024. This scenario would enhance affordability for buyers and provide more flexibility for sellers looking to move, as they wouldn’t feel as constrained by their current low mortgage rates.

Bottom Line

The Federal Reserve’s decisions, particularly in not raising the Federal Funds Rate, are expected to have an indirect impact on mortgage rates, likely leading to a continued decline. To stay informed about these changes in the housing market and their implications for you, let’s connect for expert advice.

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