PHOENIX (AZFamille) — The Federal Reserve cut interest rates on Thursday. for the second time in the last three months.

With inflation falling, the Fed is slowly lowering its policy rate from its highest level in 40 years.

Mortgage rates generally fall when interest rates are reduced. But the cost of a new home loan is increasing. Potential buyers are confused and frustrated.

Economic expert John Wake says interest rates are just one of the things lenders consider when looking at mortgage rates. A 30-year fixed rate is still lower than last year at the same time but remains too high for future buyers.

“Usually when they cut the rate, that means mortgage rates are going down,” Wake said. “It’s crazy right now.”

He says that while many were hoping mortgage rates would drop along with interest rates, there’s one reason that didn’t happen: lenders anticipated it. “A lot of people were expecting them to drop rates and when they did, they already included that in the direction of their rates, so they didn’t drop that much,” Wake said.

This is the second rate cut in the last three months. The interest rate now ranges from 4.5% to 4.75%. Meanwhile, mortgage rates are up 6.8% from 6.1% in September. “Nevertheless, mortgage rates are a percentage lower than they were a year ago at this time. So they’re not as bad as they used to be. » said Wake.

Wake says lenders use other factors to calculate mortgage rates, like unemployment and inflation, making the calculation complex and nuanced. In fact, he says, there’s only one thing that guarantees mortgage rates will go down: “If you go into a recession, mortgage rates will go down.” You may not have a job, but mortgage rates will still go down. The economy is pretty good. People kept thinking we were going into a recession and that would be good for housing and interest rates, but that’s not what happened.”

But what do mortgage rates mean for the real estate market? “The market right now is terrible for first-time home buyers,” Wake said.

And he says it’s difficult for sellers. “When your mortgage rate is three percent or less on the home you currently own and 6 percent on the home you want, that’s a huge difference in terms of your monthly payment,” Wake said.

Wake says, however: The Valley’s housing situation is unique because more people are moving here than in other parts of the country, which keeps prices high and the market strong.

As for battling the mortgage rate, he says you can buy and refinance, or consider expanding your current home if you need more space.

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