Mortgage Planning ABC

Below, I summarize what happens to mortgage rates following the start of a Fed easing cycle. An easing cycle is when the Federal Reserve begins a pattern of lowering it’s target Federal Funds Rate.

The source for mortgage rates is Freddie Mac’s Monthly Primary Mortgage Market Survey for 30-Year Fixed-Rate Mortgages. I am ignoring mortgage points, which stayed fairly constant during each comparison cycle.

My only commentary is (1) this is definitely not a scientific study and (2) there are a lot of things to consider when it comes to mortgages besides what the Federal Reserve is doing (I’ll be focusing a lot more on these things in the coming weeks).

1990 Easing Cycle
Month of first easing: 10.17%
One month later: 10.01% (-0.16%)
Three months later: 9.64% (-0.53%)
Six months later: 9.5% (-0.67%)
12 months later: 8.86% (-1.31%)

1995 Easing Cycle
Month of first easing: 7.57%
One month later: 7.61% (+0.04%)
Three months later: 7.64% (+0.07%)
Six months later: 7.2% (-0.37%)
12 months later: 8.32% (+0.75%)

1998 Easing Cycle
Month of first easing: 6.72%
One month later: 6.71% (-0.01%)
Three months later: 6.74% (+0.02%)
Six months later: 7.04% (-0.32%)
12 months later: 7.82% (+1.10%)

2001 Easing Cycle
Month of first easing: 7.38%
One month later: 7.03% (-0.35%)
Three months later: 6.95% (-0.43%)
Six months later: 7.16% (-0.22%)
12 months later: 7.07% (-0.31%)

Related Links:
Chart showing Federal Funds Rate vs Mortgage Rates
Prime Rate Down but Mortgage Rates Up?
Should You Care About the Federal Reserve