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The Fed Cut Rates—What It Means For You
You’ve probably heard the news…“The Fed cut rates!” But what does this actually mean and how will it affect you when it comes to buying, selling or refinancing a home?
Today’s article gets into all the nitty gritty details and what you need to know about what it means for you.
What It Means When The Fed Cut Rates — Not What You Might Think!
During its September meeting last week, the Federal Reserve reduced the federal fund rate by 50 basis points. This was the first rate drop by The Fed since 2020, which is welcome news for consumers, homeowners and prospective home buyers, but it DOES NOT mean mortgage interest rates came down by half a point.
The “fed rate” is the rate banks use to lend each other money, not the rate they use to lend us money. It’s true that when the fed rate goes up and down, the rates offered to us consumers also goes up and down on everything from credit cards, car loans and yes, even mortgages.
But, the fed rate is NOT the same thing as the rate we pay for a mortgage. So, even though the fed cut its rate by 50 basis points, that doesn’t mean mortgages go down by the same amount right after this decision.
What It Means For Mortgage Rates
Just like the stock market, mortgage rates can go up and down every day, even if the fed rate remains the same. That’s why even though the fed hasn’t dropped their interest rate since 2020, interest rates on mortgages have been moving up and down since then.
In fact, mortgage lenders already planned on The Fed cutting their interest rate and interest rates on mortgages started dropping months ago and dropped even further the week prior to their decision.
The interest rate you pay on a mortgage depends on so many factors. Yes, what the Federal Reserve’s rate is does have an impact, but so does everything from what type of home you are buying, where it’s located, how much you putting down, your credit score, and many other factors. If you are thinking of buying a home or refinancing the one you’re in, be in touch. I compare lenders’ rates every day and can connect you with local lenders that have the lowest rates I’ve seen.
What This Means For You
The fed cutting interest rates will spur buyers and sellers who have been sitting on the sidelines the last few years into action.
I hope this information is helpful to you, but I also know the best way I can help is to have a conversation about your situation. There is no one right way to buy, sell, or refinance a home. There are tons of options and that is great but can be overwhelming. I don’t want you to make a mistake or not know about an option that is the best option. That’s why I always encourage my friends, family, and clients to reach out to me long before you are ready to make whatever move you are thinking about making. Contact me anytime for a no obligation, no-pressure conversation. I’m looking forward to hearing from you and learning how I can help create the best scenario for YOU.
As always, I’m your go-to resource for all things real estate, even if you aren’t buying or selling anytime soon.
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