{"id":1004735980,"date":"2024-11-06T10:59:45","date_gmt":"2024-11-06T18:59:45","guid":{"rendered":"https:\/\/www.commercialsearch.com\/news\/?p=1004735980"},"modified":"2024-11-07T02:45:25","modified_gmt":"2024-11-07T10:45:25","slug":"why-arent-mortgage-rates-dropping-after-the-fed-rate-cut","status":"publish","type":"post","link":"https:\/\/www.commercialsearch.com\/news\/why-arent-mortgage-rates-dropping-after-the-fed-rate-cut\/","title":{"rendered":"Why Aren\u2019t Mortgage Rates Dropping After the Fed Rate Cut?"},"content":{"rendered":"
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\"David
David Frosh<\/figcaption><\/figure><\/div>\n\n\n

Over the past year, I\u2019ve highlighted that lowering the federal funds rate won\u2019t necessarily lead to a drop in mortgage rates. With the Fed rate lower, we\u2019re seeing daily headlines asking: \u201cWhy aren\u2019t mortgage rates following?\u201d<\/p>\n\n\n\n

Let\u2019s set the record straight that I\u2019m not claiming any prophetic insight. While interest rates have historically moved in tandem with the federal funds rate\u2014especially since the Great Recession\u2014that correlation isn\u2019t ironclad. And what we\u2019re witnessing now is a prime example of market unpredictability. Mortgage rates initially dipped after the Fed’s cuts, but most have rebounded.<\/p>\n\n\n\n

So, what gives? The Federal Reserve lowered rates, but treasuries are rising, and mortgage rates are up slightly. The underlying drivers of mortgage interest rates are much more complex. Banks are facing high capital costs while working to clean up their loan portfolios, thereby limiting their ability to offer more favorable lending terms. Until banks achieve better liquidity, we won\u2019t see mortgage rates drop significantly. <\/p>\n\n\n\n

Much of the issue is about supply and demand of money. Private credit is picking up some of the demand but at higher interest rates. And although private credit as a percent of total mortgage debt issues will continue to increase, it is not enough to relieve supply issues. <\/p>\n\n\n\n

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READ ALSO:<\/strong> What CRE Should Watch for in the Trump Presidency<\/a><\/p>\n\n\n\n

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The gap between buyers and sellers, though narrower, is still too wide. A further widening of the spread between interest rates and cap rates would help stimulate more real estate transactions. There\u2019s broad demand for lower rates, and I share that sentiment as both a lender and investor. But here\u2019s the real question: Should the Fed act to push rates lower?<\/p>\n\n\n\n

In my view, the Fed would only act if it saw an imminent threat to the banking sector from sustained high rates<\/a>. Currently, banks seem to be weathering the storm. Despite trillions in commercial real estate debt maturing with limited refinancing options, it hasn\u2019t triggered a crisis. Bank balance sheets were relatively strong heading into the Fed’s aggressive rate hikes, and they’ve successfully navigated this challenging environment, at least for now.<\/p>\n\n\n\n

And while foreclosures remain low, there\u2019s little pressure on the Fed to cut rates further. Inflation looms large in the minds of Federal Reserve policymakers\u2014perhaps even to the point of paranoia. We continue to have a strong economy. Record-low unemployment, and GDP growth in the 3 percent range is not the type of data to motivate more rate cuts.<\/p>\n\n\n\n

The case for lowering rates seems weak, much to my own disappointment. As real estate investors, we\u2019ll need to navigate this high-rate environment for the foreseeable future. But if there\u2019s one lesson here, it\u2019s that mortgage rates are no longer a straightforward reaction to the Fed\u2019s moves. The financial ecosystem is far more complicated\u2014and so are the solutions.<\/p>\n\n\n\n

David Frosh is CEO of Fidelity Bancorp Funding<\/a>.<\/em><\/p>\n","protected":false},"excerpt":{"rendered":"

David Frosh of Fidelity Bancorp Funding on the basic principle keeping the cost of capital high.<\/p>\n","protected":false},"author":3461,"featured_media":1004698095,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[51037,21684],"tags":[],"class_list":["post-1004735980","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-trends","category-viewpoint"],"acf":[],"yoast_head":"\nWhy Aren\u2019t Mortgage Rates Dropping After the Fed Rate Cut? - Commercial Property Executive<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.commercialsearch.com\/news\/why-arent-mortgage-rates-dropping-after-the-fed-rate-cut\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Why Aren\u2019t Mortgage Rates Dropping After the Fed Rate Cut?\" \/>\n<meta property=\"og:description\" content=\"David Frosh of Fidelity Bancorp Funding on the basic principle keeping the cost of capital high.\" \/>\n<meta property=\"og:url\" content=\"https:\/\/www.commercialsearch.com\/news\/why-arent-mortgage-rates-dropping-after-the-fed-rate-cut\/\" \/>\n<meta property=\"og:site_name\" content=\"Commercial Property Executive\" \/>\n<meta property=\"article:publisher\" content=\"https:\/\/www.facebook.com\/CPExecutive\" \/>\n<meta property=\"article:published_time\" content=\"2024-11-06T18:59:45+00:00\" \/>\n<meta property=\"article:modified_time\" content=\"2024-11-07T10:45:25+00:00\" \/>\n<meta property=\"og:image\" content=\"https:\/\/www.commercialsearch.com\/news\/wp-content\/uploads\/sites\/46\/2024\/01\/David-Frosh.jpg\" \/>\n\t<meta property=\"og:image:width\" content=\"805\" \/>\n\t<meta property=\"og:image:height\" content=\"620\" \/>\n\t<meta property=\"og:image:type\" content=\"image\/jpeg\" \/>\n<meta name=\"author\" content=\"David Frosh\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:creator\" content=\"@cpexecutive\" \/>\n<meta name=\"twitter:site\" content=\"@cpexecutive\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\/\/schema.org\",\"@graph\":[{\"@type\":\"WebPage\",\"@id\":\"https:\/\/www.commercialsearch.com\/news\/why-arent-mortgage-rates-dropping-after-the-fed-rate-cut\/\",\"url\":\"https:\/\/www.commercialsearch.com\/news\/why-arent-mortgage-rates-dropping-after-the-fed-rate-cut\/\",\"name\":\"Why Aren\u2019t Mortgage Rates Dropping After the Fed Rate Cut? 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