How does a Fed Rate Cut Impact Real Estate and Mortgages?
Earlier this week, the Federal Reserve (aka The Fed) cut interest rates by a quarter percent and it's made tons of news. As a result, I've been asked by lots of clients about what this means for them.
The quick answer is that when a Fed rate cut happens, it impacts short term interest rates. That means your car loan, credit cards and/or your home equity line of credit, what we call a HELOC, are immediately impacted. If you're a home owner that's been thinking about tapping into your equity, now is a great time to do so. A HELOC can be used for just about anything, whether it's for your kid's college fund, to put on that addition you've been waiting for, or to pay off other loans.
If you're a potential home buyer, a lot of the questions I've been asked is how does this rate cut impact mortgage rates? The short answer is is that a rate cut doesn't impact mortgage rates directly. Mortgage rates are tied to the bond market, and as a result, mortgage rates have stayed pretty steady over the past few months.
Right now, our mortgage rate is about 3.75%. For context, the lowest that mortgage rates have been in decades has been about 3.31% in 2012. We are close to historic lows for mortgage rates and we aren't in another great recession. So what does this all mean? The likelihood of rates meeting or beating the 2012 mortgage rate low is unlikely.
If you're waiting to see if mortgage rates are going to drop any lower, chances are they may drop lower, but not by a lot (if at all). So if you have you been sitting on the sidelines waiting to see what happens, now is a great time to stop waiting and jump in. Why? Mortgage rates are great, inventory is high, and you have many more options.
This is just a quick overview of what the Fed rate cut means for you as a home buyer or home owner. If you have any further questions, I'd love to answer them so please reach out. Thank you.