Fed Rate Cut 2024: What It Means for Mortgage Lenders
The Federal Reserve has cut its key interest rate by a quarter point, setting the target range at 4.25% to 4.5%. This marks the third cut of the year, bringing the Fed policy rate a full percentage point below its peak.
Federal Reserve Chairman Jerome Powell acknowledged that "activity in the housing sector has been weak", a sentiment echoing what many in the industry are already experiencing: subdued demand driven by persistently high mortgage rates. While the rate cut may temper mortgage rate increases, significant relief appears unlikely given the Fed’s updated projections.
Highlights from the Fed’s updated economic outlook:
- Fewer rate cuts ahead: The Fed reduced its 2025 outlook for rate cuts, now expecting just two instead of three.
- Higher inflation expectations: The forecast for inflation in 2025 has been adjusted upwards.
- Median federal funds rate projections: 3.9% by the end of 2025 and 3.4% by the end of 2026.
See the Fed’s projections here.
What Does This Mean for Mortgage Lenders?
The housing market remains in a tight spot, with affordability challenges and heightened risk sensitivity. While a lower Fed rate might ease some upward pressure, lenders will need to navigate a complex environment of inflation concerns and slow housing activity.
This is the moment to lean into data-driven strategies to balance risk, ensure compliance, and maintain fair lending practices. From prudent underwriting standards to optimizing loan portfolios, lenders who innovate with insights will be the ones to stay ahead.
How are you adapting?
Share your strategies with us, and let’s explore how data can drive smarter decisions. Contact us today to learn how Polygon Research can help you turn insights into action.
