how will fed rate cut affect mortgage rates

A Federal Reserve (Fed) rate cut generally signals an easing of the federal funds rate, which is the short-term rate banks charge each other for overnight loans. This can indirectly affect mortgage rates, which are longer-term rates influenced more by investor sentiment, inflation expectations, and bond market yields, particularly the 10-year Treasury yield. When the Fed cuts rates, mortgage rates often decline in anticipation or shortly after the cut, as seen recently where 30-year fixed mortgage rates dropped to around 6.35%, the lowest in nearly a year. However, the Fed does not directly set mortgage rates, so the impact on mortgages can be gradual and influenced by other economic factors like inflation and the job market. Sometimes mortgage rates might not continue falling after a Fed cut or could even rise if inflation fears intensify or economic conditions change. Thus, a Fed rate cut can provide some relief to homebuyers and those refinancing by nudging mortgage rates lower, but it won't necessarily cause a dramatic or immediate drop in mortgage rates. Multiple rate cuts and broader economic conditions are usually needed to see more significant mortgage rate reductions.