Mortgage Rates Just Dropped to 6.17%: Why Timing Your Move Around Fed Meetings Could Backfire

Mortgage rates have dropped to 6.17%, the lowest we've seen in 14 months. If you've been waiting for rates to improve before buying or selling, this feels like your moment. But here's what many people don't understand about timing real estate decisions around interest rate changes - and why the common strategy of waiting for Fed meetings often backfires.

The Fed Meeting Misconception

Here's the typical thinking: "Mortgage rates just dropped, and Jerome Powell said the Fed will reduce interest rates at their next meeting. So I'll wait until after that meeting when rates drop even more."

The problem? If you've been paying attention, you've noticed something counterintuitive: the past few times the Fed lowered the Fed funds rate, mortgage rates actually increased immediately afterward.

Understanding Rate Speculation

Mortgage rates are based on trading of mortgage-backed securities, which operate on speculation rather than current facts. Here's why:

Stock trading is speculative: Once facts are public, they're already priced in. If the general consensus expects the Fed to decrease rates, mortgage rates adjust based on that expectation before the meeting happens.

The window is before, not after: If rates are going to temporarily improve and then jump back up, that window typically occurs before the Fed meeting, not after.

When Rates Increase After Fed Cuts

Mortgage rates can actually increase after a Fed meeting if:

1. The Fed decreases rates exactly as expected (already priced in)

2. The Fed decreases rates less than anticipated

3. The Fed's comments suggest future decreases won't be as aggressive as expected

4. Market speculation about future rate cuts becomes less optimistic

In any of these scenarios, mortgage rates can rise because the future outlook has become less favorable than what was already factored into current rates.

When Rates Continue Decreasing

For mortgage rates to keep dropping after a Fed meeting, one of these scenarios would need to occur:

• The Fed cuts rates more than expected

• The Fed cuts as expected but signals more aggressive future cuts than previously indicated

• Economic conditions shift to suggest deeper rate cuts ahead

These surprises to the upside are less common than markets accurately predicting Fed actions.

The Buyer's Dilemma

If you're trying to time mortgage rates as a buyer, understand this critical reality:

You can't lock rates until you're under contract: You cannot secure a mortgage rate until you've had your application accepted, and you can't apply for a mortgage until you have a signed purchase contract.

This means waiting for "perfect" rates before even starting your search could backfire. If rates fluctuate during your house-hunting process, you won't necessarily get the rate you were aiming for.

The Strategic Approach

The most advantageous scenario for buyers is:

1. Start looking for homes now

2. Find and get under contract on a property

3. Have rates drop while you're under contract but before you lock your rate

Essentially, you'd be getting today's pricing (based on higher rates) with tomorrow's interest rates. However, this requires some luck—you can't perfectly time it.

The Seller's Perspective

For sellers, rate drops create both opportunities and complexities:

The advantages are clear:

• More buyers enter the market

• Buyers have more purchasing power at lower rates

• The same buyer who would offer X at higher rates can offer more and maintain the same monthly payment

The potential challenge:

• More sellers may also enter the market as rates drop

• Increased inventory could mean more competition for your listing

The Bottom Line on Timing

While we wouldn't recommend trying to time mortgage interest rates - it's extremely challenging - if you're going to attempt it, you need to be ahead of Fed meetings, not waiting for them.

Right now, with rates at 6.17%, could be a good time to take advantage before the next Fed meeting. A few weeks into the future as we get closer to that meeting, rates are more likely to work against you than in your favor based on speculation adjusting market conditions.

The key takeaway: Don't sit around waiting for the next Fed meeting thinking that's when rates will improve. The improvement often happens before the meeting as markets price in expectations, not after when facts become official.

Ready to take advantage of current rate conditions? Contact The Bruen Team to discuss how today's mortgage rates and market conditions align with your buying or selling timeline.