The Fed met this week and for the first time in 11 years cut interest rates! The last rate cut was in 2008. Just a few months ago, a Fed rate cut was almost unthinkable – the economy was great, unemployment was at a 50 year low and Wall Street was doing very well. Then in 2019 we have had trade wars, Brexit, economic data was good but not as good, and President Trump was pushing for a rate cut before a recession hit. So today we have the first rate cut in years. What does that mean for mortgage rates?
The honest answer is the rate cut was already expected – that is part of the reason mortgage rates dropped over the past month. Investors had priced in a 75% chance that the Fed would drop rates by .25%. There was an outside chance that the Fed might drop rates by .50%. If that had happened, mortgage rates would probably have dropped again. Now investors are reading the meeting minutes to see if there is a chance of another drop at the next meeting.
How does the the Fed affect interest rates? The Fed controls the Federal Funds and discount rates – meaning the rate that banks can borrower at. They do not control mortgage rates. Sometimes when the Fed drops rates, it can send mortgage rates higher. Mortgage investors are always looking in the future. So it’s more important to look at what the Fed says and what is going on in the economy and stock market than the actual rate drop.
What does this mean for you? Are you looking to buy or refinance your home? Now is a great time – rates are low, should stay low for awhile. We’ll see if the Fed decides to drop rates again in September but don’t wait – rates will fluctuate up and down in the meantime. You never know where the bottom is until it’s too late! What we do know is that mortgage rates are very good! Please feel free to call or email if you have questions!
Leslie Vanderwerf, NMLS ID#335509, American Mortgage & Equity Consultants, Inc., An Equal Housing Lender, NMLS#150953 – Email – Website
