You've probably noticed that even though the Federal Reserve cut interest rates by 1% last year and signals more cuts coming, mortgage rates haven't really budged. In fact, they're still hovering around 6.8% for a 30-year fixed loan. So what gives?

Table of Contents

• Here's What Actually Controls Mortgage Rates

• What Would Actually Lower Mortgage Rates?

• What This Means for Utah Homebuyers and Sellers

• The Bottom Line

Here's What Actually Controls Mortgage Rates

Think of it this way: the Fed controls short-term rates (like what banks charge each other), but mortgage rates are long-term rates controlled by something completely different—investor demand for bonds.

When investors want to buy mortgage-backed securities (basically bundles of home loans), mortgage rates go down. When they don't want them, rates go up. It's simple supply and demand.

What Would Actually Lower Mortgage Rates?

The data tells a clear story about what drives mortgage rates up and down. Take a look at this historical pattern:

As you can see from the chart above, there's a clear historical relationship: when unemployment spikes (the gray bars showing recessions), mortgage rates typically fall. When inflation rises, mortgage rates usually follow upward.

Based on this pattern, here are the main scenarios that could bring rates down:

The Most Likely Scenario: Economic Weakness

• If unemployment rises significantly, investors typically flee to "safe" investments like mortgage bonds

• This increased demand would push rates down

• Currently, both inflation (2.4%) and unemployment (4.2%) are right in the Fed's "sweet spot"—not too high, not too low. Many argue the Fed should lower rates at least a little bit because of this.

The Gradual Scenario: Spread Normalization 

The other factor that could help is something called the "mortgage spread"—the gap between mortgage rates and Treasury bond rates. Here's what's happening:

Right now, this spread is unusually wide at 2.4% compared to the historical average of 1.8%. As markets stabilize and the Fed's aggressive rate hikes from 2022 fade into memory, this gap should slowly shrink. Even a return to normal spreads could lower rates by about 0.6%—bringing us from today's 6.8% down to around 6.2%.

The Treasury Bond Scenario: Independent Movement 

The 10-year Treasury yield could also fall independently of Fed actions if investors increase their demand for long-term U.S. bonds due to global economics, government spending, and other factors. Since mortgage rates closely track Treasury yields, this would directly pull mortgage rates lower without requiring any change in Fed policy.

What This Means for Utah Homebuyers and Sellers

For Buyers:

• Don't wait for rates to drop dramatically—it likely requires economic pain to happen quickly

• Focus on what you can control: your down payment, credit score, and finding the right home

• Remember: you can always refinance later if rates do fall

For Sellers:

• Some of the "rate-sensitive" buyers are still waiting on the sidelines

• Expect buyers to ask for concessions to go towards buying down their interest rate or other incentives

• Sellers who price their home competitively and market their home with a clear strategy tailored to their home are dominating buyer’s attention and still selling quickly for a great price.

The Bottom Line

Rates may or may not come down in the near term. But industry experts, including major homebuilders, are saying elevated rates are likely "the new normal" for now. Rather than waiting for a dramatic change that may not come, it's better to work with current market conditions.

Those that understand the market conditions can actually take advantage of the current market’s conditions and still come out ahead.

Ready to Navigate Today's Market?

Whether you're buying or selling in Utah, I'm here to help you make smart decisions based on current market realities—not wishful thinking about where rates might go.

Let's talk strategy:

• Buyers: I'll show you how to compete effectively and find programs that can help with today's rates

• Sellers: I'll help you price and position your home to attract serious buyers in this environment, causing your home to sell for the highest price possible with the least amount of headache.

Either reply to this email or call me directly to schedule your free consultation.

The best time to make a move is when you're ready and have the right guidance—not when you're trying to time the market.

Here to serve,