Does the recent rate cut mean cheaper mortgages?

Rick Gonzalez
Rick Gonzalez
Published on October 31, 2019

Yesterday the Fed announced that they were cutting interest rates again, marking the 3rd rate cut this year. As I scan the interwebs and social media I see so many people (read Realtors) who make a correlation between these cuts and lower mortgage rates proclaiming “Now is the time to buy!” to anyone who will listen, but are they right?

I’ve been a Realtor for almost 10 years but I am not a mortgage professional, but I do know quite a few, so I reached out to my good friend Phil Tredwell of the Mortgage Marketing Expert Podcast and he was happy to help, Phil says:

“The recent cut was to the Fed Funds Rate, which is not directly tied to mortgage interest rates.  By lowering the Fed Funds Rate it actually stimulates the economy by adding liquidity to the system, which drives inflation higher, and that in turn can make long term bond rates like mortgages go higher. Yesterday mortgage rates got better, but that wasn’t due to the cut, it was because the Fed would not commit to giving more cuts going forward, and that gave some optimism to the bond market.”

So what does that mean for you? Well, it means that right now Mortgage Rates are incredibly low and money is cheap, so if you are in the market now is a great time to buy…however, as Phil eluded to if the recent rate cut has its desired effect and the economy improves we may see Mortgage Rates increase soon. So if you are a potential buyer, sitting on the sidelines waiting for this recent cut to LOWER mortgage rates, you may miss your window!

OpenClipart-Vectors / Pixabay

Here in Freeport Fl, I am always hearing about the shortage of “Affordable Housing”. It’s a real problem in our market, with new homes selling before completion signaling high demand which in turn increases the prices of the next home. We are seeing home price increases far outpace wage/salary increases. You may even call it an affordability crisis! There was an article in NYTimes recently that summed up what we are seeing here in Freeport.

“The escalation in prices is a particular challenge for first-time home buyers, who must struggle to come up with an ever-larger down payment. And while price appreciation has slowed somewhat over the past year in many markets, that isn’t true for entry-level homes, which are still seeing low inventories and rapid price growth.

“The few entry-level homes that are on the market are getting snapped up so quickly that it perpetuates the increasing home values in some of these markets,” said Matt Speakman, an economist at Zillow.” Ben Casselman.

Cheaper loans do not mean that loans are easier to get. Unlike the housing crisis, the requirements for obtaining a loan today are still quite stringent.

The bottom line is this, as a potential homeowner there are many factors in play when deciding whether this is a good time for you to buy or not. My best advice is to get great advice from trusted professionals in the business, not Cliff from the bar unless Cliff is a mortgage and/or real estate professional, and even then maybe discuss over coffee not scotch.

Of course, the Freeport Insider Home Team and our extended team of Mortgage, Insurance, and Legal professionals are all here to help when needed.

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