The Fed cut rates, so what does that mean for homebuyers?

Mortgage rates have recently hit a new low in the anticipation of action by the Fed.  Now that the Fed has cut the federal funds rate by half a percent, you may be wondering how that affects your qualification amount and subsequent monthly payment.

 

While the Fed cutting the federal funds rate is helpful for the stock market and banks with regard to short-term loans (think credit cards, personal loans, HELOC's),  it doesn't do what we might think to mortgage loans which are long term loans.

 

 

Mortgage rates are closely tied to the Federal 10-year Treasury yield.  When there is volatility in the market, investors seek a safer return on their investment so they go to bonds as opposed to stocks.  The more money there is in the bond market, the less expensive it is to borrow money long term.

 

 

While it may seem like the Fed cutting rates means even lower mortgage rates, we'll probably plateau around the low to mid 6's for a while, with anticipation to get into the high 5's by end of Q1 2025.

 

It is so easy to get confused by conflicting information, especially in today's world of online news and social media.  Make sure you are aligned with a team of local experts (lender, REALTOR, financial advisor, etc.) to keep you up-to-snuff on what the market is doing real time.