This morning, rate sheets are taking a beating reminiscent of the chaos you’d expect from a Tyson/Paul fight. The risk for repricing is high today, as bonds struggle to hold steady. While they’ve started the day with some stability, there’s a real possibility they could sell off, triggering worse reprices.

I’ve been cautioning everyone for days leading up to the Fed meeting that this was a likely scenario. If you locked your rate earlier, good job protecting yourself. However, those still floating and holding out hope for rates to fall are delaying the inevitable—rates are not coming back down anytime soon.

Let’s break down what happened and why it’s impacting mortgage rates so significantly.

Fed Cuts Rates by 0.25%—With a Hawkish Twist

As widely expected, the Federal Reserve announced a 0.25% rate cut, marking the end of their latest “recalibration” phase. However, the decision wasn’t unanimous—one member voted against the cut, and the upcoming meeting minutes may reveal additional dissenters. Based on the Fed’s dot plot projections and Chair Powell’s comments, this is likely the last rate cut we’ll see for quite some time.

Here’s where it gets dicey:

  • Dot Plot Projections: The Fed’s dot plot signaled just two rate cuts in 2024, falling short of the three cuts markets had been expecting. This hawkish outlook was enough to drive rates higher.
  • Powell’s Press Conference: Chair Jerome Powell doubled down on the Fed’s shift back to prioritizing inflation over the labor market. He highlighted rising inflation forecasts, particularly for 2025. Markets took this message seriously, which bodes poorly for mortgage rates.

What Does This Mean for Mortgage Rates?

The combination of a hawkish dot plot, inflation-focused messaging, and Powell’s comments sent mortgage rates climbing higher—and the trend isn’t likely to reverse soon.

  • The Fed’s updated stance reinforces concerns that inflation will remain sticky, pushing markets to price in higher rates.
  • For borrowers and those waiting on the sidelines, this signals that mortgage rates are unlikely to drop in the near future.

The Bottom Line

Yesterday’s Fed meeting, projections, and press conference were unequivocally bad news for mortgage rates. If you haven’t locked your rate yet, now is the time to seriously consider it before rates climb further.

As always, I’ll keep you updated on market movements and what they mean for you as a borrower or industry professional. If you have questions or need help navigating this environment, don’t hesitate to reach out!