What the Fed’s Rate Cut Means for Buyers, Sellers and Even Homeowners Who Aren’t Going Anywhere
Home buyers, sellers and even homeowners who aren’t planning to go anywhere could all benefit from a recent move by the Federal Reserve last week as it cut interest rates for the first time since 2008.
Even though the federal fund rate is not linked directly to mortgage interest rates, its movement can impact mortgage rate fluctuations. The Federal Reserve sets the short-term rate for the overnight exchange of money by banks (i.e., banks borrow from one another). The Fed will adjust this rate depending on the outlook for the overall US economy.
The Fed cutting interest rates last week is a sign that economic conditions are weakening, and the cut signals that the Federal Reserve is looking to get ahead of a potential economic slump.
What It Means for You
For buyers—Even though 30-year fixed loans have been hovering below 4%, there could be an additional dip in these rates even though there was some decrease in anticipation of the Fed’s move. That means you have more purchasing power or lower monthly payments for the same price point if you were planning to buy a home soon. Having more purchasing power is good news, especially as home prices have been increasing in certain neighborhoods. With every dip in interest rates, buyers can now get more home for their money.
For sellers—The drop in rates could lead to lower interest rates for buyers, which could cause an uptick in demand. If you were planning on selling this Fall, your timing is great, as there should be strong demand from buyers.
For homeowners who aren’t going anywhere—For current homeowners who aren’t looking to buy or sell anytime soon, there is good news for you too.
- If you’ve been wanting to refinance, it’s a good time to look into it and save on your monthly payment.
- If you have an adjustable rate mortgage, you could see a decrease in your payments when the loan resets next.
- Lastly, if you’ve been wanting to take out a home equity line to do any repairs or a major renovation to your home so you can stay for years to come, your interest rate could be lower for this too. Let the renovations begin!
Right now, a win for the housing market overall. Let’s keep an eye on the economy as a whole and adjust our home buying and selling plans accordingly.
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