Mortgage rates have declined dramatically over the past several weeks. But the Federal Reserve's latest rate cut does not guarantee that rates will keep dropping.
In fact, mortgage rates often climb following a cut in the federal funds rate, and actually rose about 50 basis points after the Federal Reserve announced its emergency 75-basis-point cut Jan. 22.
"The Federal Reserve just lowered interest rates by three-quarters of a point and yet we saw one of the biggest one-day increases in mortgage rates that we've seen in 10 years," says Bob Walters, chief economist of Quicken Loans.
"It shows you that there isn't a correlation to the federal funds rate when it comes to mortgage rates," he says. "It also shows you how quickly things can change."
For that reason, now is the time to lock in a loan. You might wince if you secure a loan and rates continue to fall, but you'll really kick yourself if you hold out for a bottom, only to miss it.
Conclusion
It's impossible to guess where mortgage rates are headed after a federal funds rate cut. Trying to guess when -- or even if -- already attractive rates will fall further is a fool's game. Instead, lock in your rate now.
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