By hannover-web.com In a recent conversation, Brett Nicoletti, branch manager of Guild Mortgage in Los Gatos, shed light on the Federal Reserve’s recent decision to cut the benchmark interest rate by half a percentage point, bringing it down to around 4.9%. This marks the first rate cut in over four years, following a prolonged period of elevated rates aimed at countering inflation stemming from the COVID-19 pandemic.
Nicoletti explained that while keeping rates high helped stabilize consumer prices, it also led to a spike in mortgage rates, making it challenging for many potential homebuyers to enter the market. According to Freddie Mac’s latest data, the average rate for a typical 30-year fixed mortgage now hovers around 6.2%, more than double the historical low of 2.8% recorded three years ago.
Looking ahead, Nicoletti expressed optimism about a continued decline in mortgage rates as the year draws to a close. He noted that since the spring, when rates climbed above 7%, there has been a decrease of over a full percentage point, with a significant drop occurring in the past month and a half as lenders adjusted their rates in anticipation of the Fed’s actions.
Oscar Wei, an economist with the California Association of Realtors, also weighed in on the Fed’s plans, suggesting that we could see two more rate cuts by the end of the year. Wei predicts mortgage rates might fall to around 6% during that period, with further reductions potentially continuing into 2026, when long-term mortgage rates could stabilize around 5%.
When discussing the impact of lower interest rates on home prices, Wei observed that potential buyers might view this as a prime opportunity to purchase. He noted that if buyers realize substantial rate cuts might not happen again soon, this sentiment could create upward pressure on home prices. However, he did acknowledge that as fall approaches, a seasonal slowdown could lead to month-to-month price declines.
Wei added that in certain affluent areas of the Bay Area, buyers who can make larger down payments might still push prices up. He also mentioned that as mortgage rates continue to drop after 2025, some hesitant sellers might finally decide to list their homes, easing some inventory constraints in the competitive Bay Area housing market. He anticipates that heightened demand could drive home prices up by 4% to 5% annually, aligning with historical patterns.
Regarding the current refinancing situation, Nicoletti emphasized the importance of individual circumstances. For those who purchased homes when rates peaked around 7%, refinancing now could prove highly advantageous. He noted a growing willingness among lenders to restructure mortgages, with some buyers already managing to reduce their rates by a percentage point. However, he cautioned that for most homeowners, it might take a few more months before the refinancing landscape becomes ideal.
