So, the federal Reserve cuts rates charged to banks by a quarter percent. I asked two local lenders to weigh in on what that means to the home mortgage market...
Response from Stephan Haney, Annapolis Mortgage Manager at Howard Bank.
"This is the first rate cut since 2008. As such, interest rates are trending lower which is providing for more purchase power to buyers while also giving them more options. In direct correlation, this increase in buyers purchase power means more eligible borrowers for sellers as well. With the limited inventory currently, we will see even more of a push into a seller’s market than we’ve seen recently.
Even with them lowering the prime lending rate doesn’t necessarily mean that the rates will stay down though. This is just the rate the Banks borrow money from the Federal Reserve. There are many other factors in play that are keeping the actual interest rates down that have nothing to do with the lowering of the fed rate such as the purchase of US bonds that are affected by tariffs, serious world events, unemployment, stock market fluctuation, etc.
Needless to say, the interest rate market changes constantly based on the financial and non-financial world around us, so it’s always smart to grab ahold and make a move while the window of opportunity is available. If anyone is looking to buy their first home, sell and move up, or downsize with these rates at the historic lows again, the time purchase is now!!!"
I also asked Rob Gallagher of Prosperity Home Mortgage and he had a slightly different take on it.
"There was some significant market activity after our conversation today and I wanted to provide you with updated information. The late afternoon announcement of a 10% Tariff on Chinese goods was a market mover in the Mortgage Interest rate arena. I’ll explain why later. The move by the Federal Reserve yesterday was in regard to the Fed Funds Rate which influences short term financing such as Car loans and Credit Card rates. This is also the basis for Home Equity Lines of Credit (HELOCs) in many cases but that is it as far as the mortgage world is concerned. So where do we go from here? I have been through multiple Federal Reserve moves during my career, both lowering and rising. Some economists were calling for the Federal Reserve to make a more dramatic .50% cut, which they did not do, the Fed made a .25% cut. This left the door open for another possible cut in the future. So far the Fed Chairman has not made assurance about if additional cuts will be made or not.
With all of these moves and economic activity we have to remember, People buy homes for security, investment and simply to have a roof over their heads while gaining equity. Being in the mortgage business for 26 years, I have yet to have a client who bought the home simply because of Interest Rates. I have had many who bought less home due to higher rates and lower interest rates provided clients with more home due to greater affordability. For now, we should Enjoy these low rates and now is the time to buy that larger home.
“Now is the time to Buy” is a very true statement. "
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