10/03/2024
The Federal Reserve Board cut policy rates by 0.50% at their most recent meeting. At his press conference, Fed Chair Jerome Powell hinted at more cuts to come this year.
What exactly did the Fed say?
The Fed’s statement described recent cooling for both the job market and inflation. The Board believes a policy rate cut can boost private sector spending on labor without endangering the slow-down in inflation rates. While Powell is optimistic for more cuts this year, he reiterated that future data would determine when and if those cuts are made.
Will mortgage rates fall in response?
The Fed does not directly control mortgage rates. In fact, investors in mortgage-backed securities often act in anticipation of Fed moves. Rates had already dropped to their lowest levels of the year. It’s too early to know where they will settle after the Fed’s action.
Should you wait to make your move? A qualification consultation or even a pre-approval is a great place to start.
Here are four factors to consider in your decision:
• You may be able to land a better rate even before the Fed acts again. Mortgage rates often move in anticipation of Fed policy rate changes or in response to other news.
• A Fed rate cut is likely to usher in more competition and higher house prices. Purchasing now at a slightly higher rate and lower price could be a less expensive option.
• By purchasing now, you can divert your rent money to building equity in a home of your own. Paying rent builds equity for your landlord; making mortgage payments builds equity for you.
• Getting started now with a pre-approval can put you at the starting line when you’re ready to make a move.
Background on the Fed:
•The Federal Reserve Board (the Fed) controls the federal funds rate and discount rate, which are charges for overnight loans from bank to bank or from the Fed to member banks.
• This rate was lowered to near zero in March 2020 in response to the pandemic.
• The Fed has a standing inflation target of 2%. When historic inflation hit in March 2022, they began a cycle of rate increases to slow spending and bring it down.
•September brought the first policy rate cut since the initial change in 2020.
