Have Mortgage Rates Finally Peaked This Year?

By Kyle Koller

Producing Branch Manager of UMortgage West - The #1 Producing Team at UMortgage

With the news of the recent interest rate drop from the Federal Reserve, a lot of people have been asking me, “Have interest rates finally peaked?” There are a ton of would-be homebuyers who would love to make a move, but they’re stuck sitting on the sidelines until interest rates drop and they can afford a reasonable monthly payment. Naturally, these buyers are pretty excited about the Fed’s decision to cut rates on September 18; however, they’re still unsure whether or not these changes will stick around. While no one has a crystal ball, I’m pretty confident predicting that this recent rate drop is here to stay, and there are a few key reasons why:

1. The Federal Reserve is still playing catch up. People have been predicting that interest rates would fall for a long time, but every time they thought the Fed would finally drop rates, they held off. This was mainly due to two factors: Persistent inflation and good job reports. As long as job reports kept showing a strong economy and resilient job market, the Fed was hesitant to make a move that might increase inflation, even if it helped spur growth. However…

2. Job reports aren’t as good as we thought they were. Recently, the U.S. Department of Labor made corrections to some of their past job reports from 2024 that showed the economy might not have been as strong as previously thought. Thousands of jobs were removed from the records, and the projected unemployment rate increased. Plus, more part-time jobs were created than full-time ones, which is a key indicator of a stagnant economy. This news is likely what finally caused the Fed to take action and decrease rates, and since this story is still developing, rates likely won’t increase until there are significant changes in the job market.

3. Uncertainty is good for interest rates. Between the job reports, inflation, and the upcoming election, there’s a lot of uncertainty in the economy. To increase consumer confidence and spur the economy, the Fed will likely keep rates relatively low to keep the economy strong in this tough time. No one knows for sure whether or not a recession is around the corner, but as long as there is uncertainty, rates are unlikely to increase.

Right now, the market is in a sweet spot for homebuyers. Rates are lower, but the market hasn’t adjusted yet to your increased buying power. Soon, buyers will flood the market and drive up home prices, which is why I recommend calling or emailing me now if you are even considering buying in the near future. Our conversation will be 100% free and come with no obligation; we’ll just discuss your options in this new environment. I look forward to hearing from you!