What do Rate Cuts Mean to Buyers and Sellers
January 30, 2008 The Federal Reserve ("the Fed") cut key interest rates another half of a percent today. I've had quite a few buyers and homeowners ask me if that means mortgage rates will drop some more.
The answer is a resounding "It depends".
The actual Fed Funds Rate is the interest rate at which depository institutions lend balances at the Federal Reserve to other depository institutions overnight. However, mortgage rates aren't generally tied to the Feds Fund Rate. If you have credit cards or loans that are tied to the prime rate, then you could see a change in those rates (though this depends on your actual loan agreement).
Mortgage rates are affected by the bond market, which tends to try and anticipate what the Fed is going to do, as opposed to being directly tied to the Fed's actions. The stability of the overall economy has a lot more to do with mortgage rates than what the Fed does. If the bond market thinks that inflation is under control, then rates should go down. If the bond market thinks the Fed is off it's rocker, then rates would likely go up.
Quite often, the rates do both...drop initially and then rise. Or, they do the opposite. There's just no knowing for sure what the bond-buyers and sellers are going to do. Some say that the cuts could cause inflation fears and that would send the long-term rates higher.
The best advice for those wishing to refinance or those planning to buy is to know your goals and look at the big picture. Worrying over an eigth of a percent here and there can drive you nuts and you'll never move off of dead center.
Stay tuned...
(C) Susan Pruden.
A lifetime Maryland resident, Susan Pruden has the ideal foundation for selling and buying homes. After 8 years working in just about every facet of the mortgage industry, and several years with her own company specializing in marketing for real estate agents, Susan got her real estate license in 1994. Susan has earned several industry awards. The CENTURY 21 Quality Service Pinnacle Award is based on reviews from Susan's clients and is earned by a very small percentage of agents. She has earned that coveted recognition since 2012
Two others were awarded by the Prince George's Association of REALTORS®. The Distinguished Sales Associate of the Year Award is based on a mixture of community involvement, association involvement and real estate education and designations. The other, the Distinguished Service Award, is for "exceptional meritorious service."
Susan is involved in her local community. She was named Cheverly Volunteer of the Year in 2018, even having June 25th designated "Susan Pruden Day" in the Town of Cheverly. She is also a Commissioner on the Prince George's County Historic Preservation Commission and President of the Cheverly American Legion Auxiliary.
Susan Pruden has lived in Cheverly lived with her husband, Joseph, for almost 30 years.
