With recent news of the Federal Reserve dropping interest rates, many people expected to see mortgage rates decrease, as well. However, that hasn’t been the case.

“It can be hard to understand, especially considering that in some cases people saw those rates increase,” said Becky Seda, lead agent with Seda Real Estate Group, in Oklahoma City.

It’s really a complex issue, but we’ll try to help break it down.

At first glance, it makes sense to assume that when the Federal Reserve lowers interest rates, mortgage rates would follow suit. So why hasn’t that been the case?

“Mortgage rates follow the treasury,” Seda said. “Car loans and smaller loans were affected more so than mortgages.”

Things like the unemployment rates, current economic conditions (including inflation) and the ten year treasury yield are what typically have the greatest impact on mortgage rates.

Stephen Bellew, with GFS Home Loans, says mortgage rates are traded on the free market, which means investor sentiment plays a role in their pricing. Investors had expected the Fed would cut rates in September, and had made investment decisions reflecting that ahead of time.

“With stronger inflation and jobs data, we are seeing mortgage rates move up as investors are seeking other avenues for their money,” said Bellew.

Seda agrees, adding, “It’s generally less likely for mortgage rates to drop while the economy is doing as well as it is and while the job rates are as high as they are.”

In fact, Seda says if you are waiting on mortgage rates to drop you might reconsider. There are benefits to buying a home now.

“Even if rates drop it will still become more expensive to buy a house,” Seda said. “Whether the rates are high or the prices are increasing — which is likely to happen if rates drop —  either way you’re still paying more.”

Currently, in Oklahoma, the market is slowly shifting to a buyer’s market. Seda said if you are someone who wants to limit your out of pocket expenses, now may be a good time to start shopping.

“Some sellers are still thinking of 2021 when the market went crazy and homes were getting multiple offers. That’s just not where we are anymore,” Seda said.

“Because houses are sitting on the market longer, sellers are ready to accept an offer. And, as a buyer that means you can really negotiate things because houses are taking longer to sell.

It’s a trade off, of sorts. You get more negotiating power, with a higher mortgage rate. Whereas if you wait for rates to drop more shoppers will likely enter the market. If that happens, you may lose your negotiating power and end up paying a higher sales price.

“This is simple economics 101, supply and demand,” Bellew said, “If you want to buy when rates are low, competition increases and the price goes up. Higher rates do equal a better market for buyers to negotiate as it lessens the pool of qualified buyers.”

Ultimately, both Seda and Bellew believe mortgage rates will come down some, but maybe not as much as some buyers are hoping, at least in the foreseeable future.

“I do think they will go down a little bit, but I don’t think it’s going to make a substantial difference for people. The people it will impact are those who need to refinance their house,” she said.

For those navigating the Oklahoma real estate market, Seda Real Estate Group is here to provide guidance and support as you work toward your real estate goals. Whether you’re looking to buy, sell, or invest, we’re dedicated to helping you make the most informed decisions possible.

Want to talk real estate? Or are you looking to buy or sell a home? We’d love to chat. Give us a call at 405-400-9973.