Federal Reserve’s Rate Cut Continues Trend of Strong Borrowing Power
At its July meeting a few weeks ago, the Federal Reserve lowered the federal funds rate for the first time in a decade. The quarter-point cut, intended to offset early signs of a slowing economy, brings the federal funds rate down to just 2 percent.
While the rate cut impacts financial institutions more directly than consumers, it does influence the options available for homeowners and in the market for a house.
Impact For Buyers
Since the Fed signaled its intention to cut rates well before its most recent meeting, the downward push on mortgage interest rates began even before the official announcement. While an additional dramatic drop in the wake of this action is unlikely, the cost of a mortgage continues to be historically low, with some buyers qualifying for rates below 4 percent.
Shoppers in the market for a new home are in a fantastic position to take advantage of the low rates with a fixed-rate mortgage. Those interested in an adjustable-rate mortgage may have seen a reduction shortly after the announcement, as those initial rates are often influenced by the Fed’s decision more directly. Since your eligibility for a mortgage and the rates you qualify for are determined by so many factors, now is the time to discuss your options with an experienced lender.
What it Means for Owners
Tracking interest rates isn’t only important for prospective homebuyers. Current homeowners can also benefit from staying informed. If you’ve been in your home for a while and refinancing would reduce your current rate by at least 2 percent, it’s likely worth exploring. Depending on the term and balance remaining on your loan, and your confidence that you’ll be staying put, a smaller reduction in rate could be worthwhile as well.
If you’re currently in an adjustable-rate mortgage that is scheduled to reset soon, you should make sure to prepare yourself for the upcoming change. Depending on the rate used to index your loan and when it was originated, there could be a payment increase or decrease on the horizon. In either case, you’ll also want to investigate whether refinancing into a fixed-rate mortgage would be to your advantage.
Finally, the downward trend in interest rates could also make a home equity loan a smart opportunity. Low-cost borrowing power can put large home improvement projects or other priorities within reach. It can also bring more buyers into the market if you’re considering becoming a seller.
Whether you own a home or want to own soon, now is a great time to speak with a trustworthy lender about your mortgage options to make sure you’re not leaving money on the table. The loan originators at Open Mortgage are ready to answer your questions.