Mortgage interest rates have finally fallen far enough to give the sluggish Vero Beach real estate market a boost, according to island agents and mortgage brokers, dropping from a high of just over 7 percent in mid-January to a yearly low of 6.13 in early September.

That was enough to lower the payment on a $1 million home loan by about $500 per month or $6,000 per year and pull some buyers off the sidelines. But it isn’t at all clear what will happen next in the complex interaction between mortgage rates and home sales.

“Mortgage rates are finally heading in the right direction, and buyers are starting to jump back in,” according to ONE Sotheby’s International Realty broker associate Hank Wolff.

Buzz MacWilliam, broker/owner of AMAC Alex MacWilliam, Inc., the oldest brokerage on the island, says more deals are being financed due to lower rates.

“Normally, about 30 percent of our sales are financed. That has increased to 40 percent,” MacWilliam told Vero Beach 32963.

“I’ve definitely gotten busier since rates hit yearly lows this summer.”

“The number of purchase loans I’ve handled is up 16 percent for the third quarter,” says mortgage broker Vincent Biscoglio, owner of Smartly Home Loans, Inc., who provided data showing that home sales in Indian River County jumped from just over 200 in July to nearly 300 in August.

“August was amazing,” says Dale Sorensen agent Tripp Hernandez, who provided data showing that more houses went under contract in Vero Beach in August than in any other month in the past two years.  “Inventory was lower and there were more sales, which gobbles up inventory.”

Brad O’Connor, Ph.D., chief economist for Florida Realtor, backs up Hernandez’s perception.

“New pending sales were up 10 percent in August compared to last August, the largest year-over-year increase since last November, when they were up 13 percent,” O’Connor said last week in his monthly statewide market report. “Before that, you’d have to go all the way back to early 2021 to find year-over-year growth like we saw in August.

“The most likely reason we saw such an uptake in new contracts in August is that mortgage rates fell to a yearly low early in the month and fell even further late in the month,” O’Connor added.

The rate-related market upturn continued into September.

“According to the data, buyer demand picked up considerably once mortgage rates hit a new low for 2025,” Wolff reported. “The Mortgage Bankers Association reports that applications for home loans were up 23 percent compared to the first week of September last year.”

So it’s clear that lower mortgage rates are boosting home sales here, even on the island where most deals are cash.

“Even if someone is paying cash for a house on the island, they may be selling their home up north to someone who needs financing,” said Wolff. “It is all connected.”

But beyond that simple fact the market picture is murky.

Rates fell over the summer in anticipation of the Federal Reserve lowering its benchmark lending rate, which indirectly affects mortgage rates.

But by the time the Fed finally cut the Federal Funds rate by a quarter of a point on Sept. 17, the bond and mortgage markets had already factored the cut in, and mortgage rates inched up after the announcement.

“The most important thing after the Fed announces a rate cut is what they say afterward,” said Biscoglio. “This time they took a dovish tone, talking about how they have to keep an eye on inflation, and when they have that dovish attitude the market reacts to it.”

“The low before the Fed cut was 6.13 percent,” says fourth generation realtor Alex MacWilliam, a manager at AMAC. “It was 6.22 by the afternoon and higher the next day.”

The average 30-year mortgage rate was up to 6.32 percent this week and no one knows which way it will move next.

“Mortgage rates could rise, steady or drop,” according to Florida Realtors.

In a recent article published by the organization, financial experts expressed divergent views on what is likely to happen going forward.

“I expect rates to have some slight upward pressure as the market processes consumer price index data and the Fed meeting,” says economist Robert J Smith.

By contrast, Sean P. Salter, an associate professor of finance at Middle Tennessee State University, says he “looks for rates to remain in the current range until we get some better idea of the true state of the U.S. economy.”

And Dr. Anthony O. Callum, president and CEO of Kellum Mortgage in Roseville, Michigan, believes “the overall momentum feels tilted towards slightly lower rates in the near term.”

OK, then!

If that’s not murky enough, it’s also unclear what will happen to the housing market if mortgage rates do resume their downward trend.

“If rates go quite a bit lower, that will bring on bidding wars and push prices up,” says Alex MacWilliam. “That will cancel out the benefit of lower rates for buyers.”

Lower rates also increase refinancing activity, which tends to keep people in their existing houses longer.

“Demand for refinances has gone up 73 percent, year to date, in my business,” said Biscoglio.

If someone refinances from a 7.5 percent rate to a 6 percent rate, lowering their monthly payment, they aren’t as likely to put their house on the market in the near future or to purchase a different home.

It’s also hard to gauge the impact of mortgage rates on the housing market because there are so many other factors pushing and pulling on buyer and seller activity, including national and international events, the state of the economy as reflected in unemployment and GDP numbers, and the seasonality of the island market.

“The majority of island buyers watch their stock portfolios more than interest rates,” says Wolff. “Since the market has been up, they are feeling more confident and that might account for some of the recent increase in contingent sales.”

Even if rates creep back up, listings will almost certainly begin to trend up in October, and sales will pick up as season progresses because there are more buyers in town and that is just the way it works in Vero Beach.

“We’re in the same sort of seasonal market we have been in the last three years, more like our traditional market before covid,” says Buzz MacWilliam, who is not convinced that lower interest rates are having as big an impact as others believe. “What I’m seeing throughout the marketplace is that sales are great for eight months of the year, October through May, and then sales decline 40 percent in June, July, August and September.

“More affordable homes are selling in the summer months, and just by the nature of the lower-priced homes, more of those are financed than the million-dollar-plus, so rates probably have some impact on that part of the market.