Mortgage Talk: What does the Fed Rate Cut Mean to Consumers?

Yes, the rumor is true...
Frank Merola is Executive Mortgage Banker for William Raveis Mortgage LLC.

You may have heard that the FED (Federal Reserve) lowered interest rates this past week.

Yes, the rumor is true This past week was a crazy busy week for things that can influence the financial markets. Let’s recap the action:

On Tuesday, the inflation numbers came in “tame” sending a signal that inflation is not a concern.

On Wednesday at 2pm the Fed announced a .250% cut in the Federal Funds rate. This announcement was already priced or “baked” into the market for mortgage rate pricing.

On Friday the jobs report was “neutral” for wage growth, but manufacturing was weak. Weak economic news normally causes money to flow out of Stocks and into Bonds, helping Bonds and home loan rates improve. In contrast, strong economic news normally has the opposite result.

Technically speaking the Fed does not set mortgage rates. Many consumers were expecting to see a quarter point drop in mortgage rates, but it never materialized on Wednesday.

Mortgage rates on home purchases change daily and sometimes multiple times per day. To put things in perspective a mortgage rate on a 30 year fixed home loan for a borrower with good credit was almost 5% just nine months ago. Today most rates are in the upper 3 percent range. So, the overall trend in 2019 has been good for mortgage interest rates.

What really influenced the financial markets like stocks, bonds and the ten-year treasury index were the comments made by Chairman Jerome Powell after the announcement of the rate cut. The Bond and Stock market had a wild ride and swung in both directions as the chairman answered questions from the media.

So, what does all of this mean?

We should see a reprieve in escalating borrowing costs, which can impact your mortgage, home equity loan, credit card, student loan tab and car payment. Rates paid on savings accounts may fall.

Home values are up as well, and this could be a temporary gift to those who are looking to refinance or consolidate debt. This represents the single biggest savings opportunity on the heels of the Fed decision.

Perhaps there has never been a better time than now to buy a home on Cape Cod whether it’s a primary residence or a vacation home.

Thanks for sharing. This article is meant to educate and not give financial advice. Feel free to reach out.

Frank Merola

Executive Mortgage Banker

NMLS Mortgage Loan Originator ID: 1020051

William Raveis Mortgage LLC NMLS ID #2630

Cell 508-740-5922

Email [email protected]


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