On Sept. 17, the Federal Reserve cut the federal funds rate by 25 basis points, or 0.25%. This is positive news: Variable interest rate costs have gone down, and such things as credit card rates, auto loan rates and home equity loan rates all should be lowered. However, it doesn’t necessarily equate to mortgage interest rates going down in lockstep.

Mortgage rates often are cut before the Fed announcement because banks project it will happen and try to get ahead of it. So, banks that anticipated that the rate would be lowered already had reduced their borrowing rates; rather than dropping further, mortgage rates actually saw a slight uptick, to 6.13%, since the rate cut. Additionally, other factors impact the housing market, such as recession and inflation (or the prospect of either). Uncertainty about inflation can lead to mortgage rates staying the same or rising.

The general consensus is that the Fed will continue to cut the rates going forward, with a projection that it will cut rates again in November. A lower federal funds rates usually leads to lower Treasury yields, which can bring down mortgage rates over time. Thus, we should anticipate seeing rates dropping for home mortgages. That makes buying or refinancing a home more affordable and puts more money into consumers’ pockets.

What does that mean for housing market?

For starters, the winter season might not be as slow as in previous years. Historically, winter sees a drop in sales due to things like return to school and holidays. But with the anticipation of another rate cut leading to consumer confidence-building, demand could stay strong. In any case, sellers likely will enjoy a healthy spring market.

As homeownership becomes more affordable for buyers, it also can heat up the housing market: More buyers means more competition, and competition can affect price. With more buyers making offers, prices can go up, making now a good time to buy. And a buyer who wants their pick of the real estate might want to get ahead of the herd and start looking before everyone sees the rates and races out to find a house.

However, as with most things federal and finance related, it’s all speculation. Consult with your financial planner and real estate agent, consider your short- and long-term needs, and work with the information you have. The future is undetermined, even for the Fed.

Kim Foemmel
Foemmel Fine Homes
1 Lumber Street, Suite 207C
Hopkinton, MA
(508) 808-1149
Kim.Foemmel@gmail.com
FoemmelFineHomes.com

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