December Fed Meeting: Are Rate Cuts on the Horizon?

Are Mortgage Rates About to Take a Leap After the Fed’s Meeting?

Mark your calendars! The Federal Reserve is gearing up for its next Open Market Committee meeting on December 17-18. The big question on everyone’s mind: Will we see another rate cut, or will rates hold steady? Buckle up, because this meeting could change everything!

In a twist of events, the annualized inflation rate has crept up for two consecutive months, reaching 2.7% in November from 2.4% in September. While it’s still under last year’s alarming 3.1%, it’s definitely raising eyebrows. Could this push the Fed to cut the funds rate again?

After two significant cuts—a 50 basis point drop in September and a 25 basis point drop in November—many are left wondering if the latest inflation trends will justify another reduction come December.

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Is a Fed Rate Cut on the Horizon this December?

As the economy slows and inflation takes a dip, the FOMC hinted in July that much-anticipated rate cuts would finally kick off in September. The Fed has been waiting for stable market data before making any bold moves, and now they’re in the hot seat.

The Fed’s mission is clear: stabilize the U.S. financial system while targeting a long-term inflation rate of 2%. Keeping inflation around this level ensures that prices remain manageable for consumers.

Remember the sky-high inflation we faced in 2021, peaking at an astonishing 41-year high of 9.1% in June 2022? The Federal Open Market Committee (FOMC) sprang into action, hiking rates to rein in inflation.

Since then, the Fed has adjusted its course multiple times. Following a pause in June and July, they made a bold 50-basis point cut in September and a 25-basis point cut in November. The latest inflation figures have risen to 2.7% in November, leaving many to speculate about the Fed’s next move.

Despite the recent uptick in inflation, market experts overwhelmingly predict another 25-point cut come December 11. Will they be right?

Will Interest Rates Keep Climbing?

2023 saw interest rates on the rise, with the average 30-year fixed mortgage hitting a high of 7.79%, according to Freddie Mac. But the tides have turned in 2024, with the 30-year FRM dipping to 6.69% as of December 5.

Although inflation has eased somewhat, it remains above the Fed’s ideal target. This leaves the door open for tightening monetary policies until inflation sees a more favorable decline. Predicting interest rates is notoriously tricky, but they often rise when the Fed tightens up.

In light of the swift rate hikes experienced in 2023, some lenders are offering the opportunity to lock in a rate for 90 days at minimal or no cost, shielding you from potential increases if you’re not closing immediately. Consider checking out lenders like AmeriSave Mortgage, Quicken Loans, and Rocket Mortgage.

Some lenders are even sweetening the deal, offering refinances without the usual lending or appraisal fees when rates finally dip. Be sure to ask your loan officer about these unique offerings when shopping for your mortgage!

Connecting Mortgage Rates and the Fed’s Actions

The Federal Reserve does not set mortgage rates directly; instead, they’re heavily influenced by the Fed’s decisions. At the end of last year, plans were laid out for multiple federal funds rate cuts in 2024.

The fed funds rate is the cost at which banks borrow money overnight from each other. An increase typically signals higher inflation and economic growth, which usually leads to rising mortgage interest rates.

How mortgage rates react immediately following these FOMC meetings has been quite mixed over the past year. After the last three rate changes, rates decreased by five (0.05%) points after the pause in July, 11 (0.11%) points following September’s cut, and just one (0.01%) after the November adjustment.

What Borrowers Should Keep in Mind

If you missed out on the unbeatable rates of the past few years, don’t fret! Current rates are still historically low, and refinancing is always an option when rates take a downward turn. Plus, remember that home equity can be a great wealth builder.

“With mortgage rates fluctuating, I always encourage buyers to focus on their specific budget and needs rather than trying to outsmart the market,” advises Nick Boniakowski, head of agent partnerships at Opendoor.

Ready to take the plunge into homeownership? Now’s the time to connect with a local mortgage lender to explore your options and see what rates you qualify for before December’s Fed meeting.

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