The Federal Reserve surprised investment markets earlier this week when it announced that it would cut its official money rate by a half-point, taking the range down to 1% – 1.25%. This news has led to increased confidence in the stock market this week. Outside of equities, anyone interested in the home market will be wondering how lower rates might affect them.
While the Fed rate is down, mortgage rates aren’t likely to go much lower than they are today. However, conditions are still favorable, and there are a couple of ways that buyers and current homeowners can benefit.
Mortgage Rates are at a Historic Low
As of Thursday, the 30-year fixed-rate mortgage average was 3.56%, while the 15-year fixed-rate mortgage average was 2.85%. The average is now the lowest it has been since 2016.
These averages could fall slightly in the coming weeks, but we’re not likely to see anything as significant as the Fed’s recent cut.
Interested Buyers Should Engage With the Market
With mortgage rates so low, now is a great time to close a new mortgage. Signing for a fixed-rate mortgage will lock in the current rate, and this could prove important, especially if lending rates increase within the next ten years.
There’s a lot of competition in the market today, with low inventory compared to the number of interested buyers. While it might take longer to find the ideal home, having such favorable lending conditions will make the process much easier and less stressful.
Homeowners Have the Opportunity to Refinance
People currently living in their forever homes can also benefit from low mortgage rates. Refinancing is an option worth considering, especially for those on a fixed mortgage with a much higher rate. Some analysts have suggested that up to 11 million homeowners could save an average of $268 per month if they refinance in today’s market.
- Refinancing fees should be carefully checked. These can amount to thousands and may diminish the savings.
- If possible, homeowners should refinance with a shorter 15-year fixed term mortgage. This will provide the best rate and a faster pathway to living mortgage-free.
- Generally, savings can be achieved if the new loan comes with an interest rate that is at least 50 basis points lower than the existing loan.
The Federal Reserve rate cut is big news, but it won’t directly impact homeowners and those who are in the market to buy. Despite this, current mortgage rates are appealing, and there’s an opportunity for those who want to save money when buying or refinancing in 2020.
You may be interested
Job Hiring is Picking Up as Employers and Consumers Gain ConfidenceLamont J - March 29, 2021
The recent government stimulus for small and medium-sized businesses, personal stimulus checks, and declining Coronavirus cases, are all great news…
Fed Could Maintain 0% Interest Rate Until 2024Adam R - March 26, 2021
The Federal Reserve is holding its target interest rate in a range of 0.00% - 0.25%, even while the economy…