Blog with MAE Capital

The Federal Reserve has lowered their prime lending rate down 50 basis points or a half of a percent aiming for a target rate of 4.75-5.00 from 5.50.  Initial reactions in the interest rate markets are neutral which indicates that the mortgage interest rate markets have factored this half percent move down in already.  Mortgage rates are now in the low 6’s and high 5’s currently.  The Federal Reserve also talked about the labor market, and this was the single biggest reason for moving rates down .5% rather than .25%

The labor market is probably the most under-reported and misreported number out of all of them.   Jay Powell (the Chairman of the Federal Reserve) said this in his comment today.  He made mention of the job creation rate of being wildly wrong (overrated) and this is why they didn’t move rates on their last meeting as they had the wrong data.  Jobs are important numbers to look at as more people working means more people buying stuff and with fewer people working the less stuff people buy.  This is directly proportional to inflation, which is what they are trying to control.   I have echoed this for months now as a mortgage professional we have been the slowest in history due to high interest rates, so our industry has laid off hundreds and thousands of workers.  In addition, without money flowing in the economy employers don’t need employees in a slow consumer market so layoffs have been happening across America for the last year or so and this has not made any news as we are in an election year.  

With the lower interest rates, you will see a gradual lowering of mortgage rates as the Fed continues to talk about future rate cuts.  What people don’t understand is that mortgage rates will continue to go down in anticipation of further rate cuts in the future.  If you are ready to buy a home now would be the time to get started before mortgage lenders get bogged down in refinances.  If you have an interest rate in the 7’s you should start the process now to lower your payments.  If you have equity in your home and you have high credit card debt you might want to consider a refinance of your home to consolidate those payments and lower your overall monthly expenditures.  You can refinance your home every 210 days with any repercussions so start enjoying lower payments today and then possibly even more in the future.