Here’s Why You Shouldn’t Wait on the Fed Rate Cut

By Andrew Hart

I am the only agent who truly feels your journey to homeownership is as important to me as it is to you!

How is the Fed rate cut related to mortgage rates? Are they even connected at all? It’s been two years since I’ve seen some news on the Federal Reserve cutting interest rates and how they affect mortgage rates. Many people believe that once the Fed drops its rates, mortgage rates will follow suit. However, this is not the case. Let’s talk about it.

When the Fed cuts rates, it actually sets the Federal Funds Rate, which is the percentage banks typically charge each other when conducting business. Cutting the Federal Funds Rate is a way to stimulate the economy and is good for various loans and credit products like credit cards.

Unfortunately, this doesn’t affect mortgage rates as much. This is because mortgage rates are affected by Treasury notes, such as the ten-year Treasury note and bond markets, which are viewed separately from the Federal Funds Rate.

When do mortgage rates usually drop? You’ll see loan rates fall before the official news that the Fed has decided to cut rates. People who follow the news have an advantage since they are updated about the Fed’s plans on cutting rates and can look out for a decline in loan interest rates in the housing market.

Knowing this information is crucial when you want to own a house. Many people make the mistake of waiting for the Fed’s announcement before they talk to their lending team about numbers and then go back to the market to shop for a property. This hive mind will put you in a competitive situation.

To give you a market advantage, call your lending team as soon as you get some news about the Fed’s plans to get together about a rate cut. Understand your numbers and move fast before the official news comes out. You’ll save hundreds or even thousands of dollars on that mortgage payment by being one step ahead.

If you want more tips on staying ahead of the market or getting insider information about real estate, I’m always ready to take your call or text. Contact me at (818) 312-3351 or Andrew@randyplaice.com. I look forward to sharing more information and helping you in your journey to homeownership.