Why are Austin and Georgetown Mortgage Rates Jumping Up and Down?

Two weeks ago, I spoke to a lead salesperson at Santa Rita Ranch in Liberty Hill, TX.  Our hot topic du jour?  Interest rates.  When I asked how sales were going, he replied, “Depends on the week’s interest rates.  I kid you not, if rates tick down, we have people lined up outside our door.  If they tick up, crickets.”

 Today, I will focus on two current drivers shaping Austin and Georgetown mortgage rates.   

#1: Why are interest rates jumping up and down like a toddler juiced on Red Bull?

From late October to late January, interest rates drifted from almost 8% to 6.25% in our local Austin/Georgetown market.  Then suddenly, they jumped higher.  What’s going on?

 First of all, mortgage rates do not move in a straight line.  By nature, they are volatile and not easily predictive.  For this reason, one headline might blast, “Interest Rates Predicted to Shoot Up by June,” while another might read, “Four Mortgage Rate Cuts Set for the Coming Year.” 

 The graph below reveals the recent jagged up-and-down movement of Austin and Georgetown’s mortgage market.

#2: What is behind the erratic behavior of Austin and Georgetown interest rates?

It is both tricky and complicated.  But let’s begin with the overly simplified answer:  The Federal Reserve. 

The Federal Reserve – the U.S. Central Bank – is the institution that determines the interest rate range that all other banks use for overnight borrowing and lending.  Members meet eight times a year to either raise, lower, or sustain the current rates.  The rates set by the Federal Reserve serve as a benchmark guide for all other rates within the U.S. Banking system. 

Now here is the tricky part:  The Federal Reserve does not set mortgage rates.  They only influence them. 

And the complicated part?  All mortgage rates are set by individual lenders.  From late October until late January, lenders began lowering interest rates based on the anticipation that the Federal Reserve would decrease their rate range by a quarter point in March.  What happened?

At their January 30-31 session, the policymakers surprised everyone by announcing a “wait and see” position.  Richmond Fed President Thomas Barkin cited concerns about persistent inflation for service industries and housing, and said data released since the central bank’s last meeting, showing strong job growth and stronger inflation than anticipated, make any rate-cut call ‘harder.’”

In response to the Fed’s decision, interest rates jumped back up.  Now what?  Keep this in mind.

The Fed’s delay is not the Fed’s denial. Mortgage rate cuts are coming.

The question is when will they arrive? Lenders are anticipating a quarter-point decrease by the Federal Reserve in June.  Why do they think so?  Because 65% of major U.S. bank presidents, professional stock and bond traders, hedge fund managers, and mutual fund managers are counting on one. How do we know this? Because of the CME FedWatch Tool.

The CME FedWatch Tool analyzes the probabilities of changes to the Fed rate and U.S. monetary policy.  As of February 24, 2024, the probability of a quarter-point decrease coming in June is 52%; a half-point reduction is 14.3%, while 33.1% signifies an unchanged rate range of 5.25 – 5.50%.

What might this mean?  For my clients who are eager to sell, I’m advising them to get ready, a shift will happen.  How so? By maximizing their home’s selling potential. If you too are considering a move – to buy or sell, let’s connect now so you can be prepared well and ready to go.