Mortgage rate averages hit another yearlong low — but the future of that trend is at stake after Wednesday's Federal Reserve meeting.
In the week ended Oct. 31, the 30-year, fixed-rate mortgage averaged 6.17%, according to mortgage giant Freddie Mac. That's down from the previous week's 6.19% and lower than a year ago, when the average was 6.72%.
The 15-year, fixed-rate mortgage mirrored that trajectory, falling to 5.41% as of Thursday. That's a decrease from last week, when the average was 5.44% and lower than the year-ago average of 5.99%.
That's not the whole story, though. Since Wednesday, daily measures of mortgage rates have bucked the downward trend.
On Wednesday, the 30-year, fixed-rate mortgage rose 0.14 percentage points to 6.27%, while the 15-year, fixed-rate mortgage rose 0.1 percentage points to 5.82%. The increase continued Thursday, with the 30-year rate up to 6.33% and the 15-year rate up to 5.85%.
The mismatch is most easily explained by the volatility of daily rates versus averages. Daily measures include immediate reactions to even small market disturbances — or, in the case of Wednesday's Federal Reserve meeting, big market disturbances — while weekly averages better offset those drastic changes.
So, when the Fed's chair, Jerome Powell, made an announcement Wednesday that wasn't in-line with investor expectations, it sent mortgage rates climbing.
What does a Federal Reserve cut mean for the mortgage market?
The mortgage market update follows Wednesday's Federal Reserve meeting, which included an interest rate cut and a glimpse into the future from the central bank's leader, Jerome Powell.
There are a few things to note before hashing out where the mortgage market could go from here. For one, the Fed doesn't set mortgage rates. Instead, it controls short-term interest rates. As those figures change, though, investors react, sending ripple effects through markets that, more often than not, reach as far as the mortgage market.
It's also important to remember that it takes time for a change to become a trend. In the case of mortgage rates, borrowing costs are highly sensitive to daily and even weekly fluctuations in the broader economy. So, on the one hand, while the immediate uptick in daily mortgage rates is not a promise that mortgages are on a long-term upward trajectory, the weekly average hasn't had time to account for Wednesday's interest rate cut.
All that said, big picture: The mortgage market is better off than it was this time last year.
Mortgage rates are hitting lower averages. More homeowners are refinancing their loans. Purchase applications are up.
"Refinance activity remains a bright spot this fall," according to Bob Broeksmit, president and CEO of the Mortgage Bankers Association. "Households who bought homes in recent years when rates were higher are now eager to lower their monthly mortgage payment.”
Whether that trend continues is dependent on forthcoming economic data, pending the end of the federal government shutdown that began on Oct. 1. For now, though, investors have little to work with beyond the Fed's Powell suggesting that an interest rate cut in December is not guaranteed.
In other words, Tuesday's upward movement in mortgage rates had "nothing to do with the rate cut itself," according to Matthew Graham, chief operating officer at Mortgage News Daily.
"As we warned, volatility would come from Fed Chair Powell's press conference," he added in a blog post on Wednesday. "In today's case, Powell said that another rate cut in December was not a foregone conclusion. This was at odds with the market's expectations, so there was a rush to reprice those expectations."