Yesterday’s announcement by the Fed that it would be dropping interest rates another .75%, combined with the beating the stock markets are taking has driven long-term mortgage rates as low as they’ve been in years. We’re seeing 15-year fixed rates down around 4.375% at par, and 30-year fixed mortgage rates in the mid to high 4% range at par.

When a major swing like what’s happened over the past two days takes place, there’s always a risk of a “rebound” so to speak, where everyone says, “Whoops, we went to far, let’s swing it back the other way.” We saw that happen last summer when Jumbo rates went through the roof, although they haven’t come down to what they were last year, investors realized 8% on a 30-year fixed A-Paper jumbo was just a little far outside the realm of reality, and Jumbo rates came back down to more reasonable levels within a few weeks to months.

We’re in a situation now where the Fed is obviously seeing signs of a recession on the horizon, and decided to forgo fighting inflation risk and lower interest rates to help mitigate the damage. The fact that the Fed seems to be much more worried about recession than inflation at the moment suggests that mortgage rates may not bounce back up, at least not significantly, unless inflation fears really take hold. At this point, rates are, by far, the lowest we’ve seen in a while; as to what will happen in the future, only time will tell.

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