It’s Fed Day!

Filed under: Market Comentary

Happy Fed Day! Today is another Fed meeting. The way it works is that they have a 2-day meeting, then on Wednesday they announce whether they are going to make a move on the Fed Funds rate. When I recorded the video, the announcement hadn’t been made yet – but everyone has been anticipating that they will reduce the rate by .25%.

The announcement came out after this video, and it was confirmed: The Federal Reserve cut interest rates for the third time this year. They also downplayed expectations of future cuts.

How Does the Fed Rate Affect My Mortgage?

I know I always say this every Fed meeting, but I always get asked about it: how is this Fed decision going to impact mortgage rates?

The answer is: it has no correlation to actual mortgage rates. But, it does have a correlation to most home equity lines of credit. These loans are almost always tied to the prime rate, which is tied to the Fed funds rate.

Should You Lock in Your Mortgage Rate?

As far as your mortgage, you might be wondering if you should lock the rate. Today’s meeting decision doesn’t mean that actual mortgage rates will go down by a .25 point. That being said, it is significant economic news that could impact mortgage rates.

For example, if the meeting announced that they are going to hold interest rates rather than reducing the rates, it would be bullish on the economy – meaning the economy is too strong. That would probably have a negative impact on the interest rates. Why? The market is anticipating a quarter-point drop, so it is priced in. It would be a surprise by the Fed to hold rates, would be positive news regarding the markets, and mortgage rates would probably go up.

History of Mortgage-Backed Securities

I looked at a 5-year chart of mortgage-backed securities, which has a direct impact on mortgage rates. When you see where we are on the chart, we are at some of the best rates we’ve seen in the last 3 – 5 years.

If you are currently in the mortgage market, don’t worry about the announcement because it won’t have a direct impact on your mortgage rate. As always, I’m here to answer your questions if you are thinking about buying a home or refinancing. I’ll help you find the best mortgage options to meet your individual situation!

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