So, what's up with the financial markets and how does this relate to real estate?
As expected, the Fed cut policy rates by 0.25% at their most recent meeting. You might recall that the Federal Reserve committee voted unanimously to decrease rates by a ¼ percentage point at their July meeting, effective on August 1st.
Who is the Fed?
The Federal Reserve Board (the Fed), controls the Fed Funds Rate and the Discount Rate. These are charges for overnight loans from bank to bank or from the Fed to member banks.
What does a cut mean?
• It could cause banks to reduce their “prime rates,” which are often used to calculate interest on consumer products like credit cards, private student loans, and home equity lines of credit (HELOCs). Adjustable Rate Mortgages (ARMs) may be directly impacted as well.
• Fixed mortgages are typically based on long-term rates, which are not directly affected by Fed rate changes. However, Fed policy does influence mortgage rates, which can change in anticipation of future Fed action. Sometimes, rates will have fallen in advance of a Fed cut, then they’ll rise again after the announcement is made. There are exceptions, yet home loan rates will typically follow overall interest rate trends over time.
The next meeting for the Federal Reserve is scheduled for October 29th – 30th.
How can I help?
I’m tracking the changes carefully and am happy to keep you informed whenever you like.