The Federal Reserve has recently cut interest rates by a quarter of a point (or 25 basis points), the first fall since the so-called Great Depression in 2008. The cut in interest rates from the Fed came as a result of worries about a slowing economy. Many Americans, especially home buyers, will feel it, but perhaps not in the way and as dramatically as some predict. However, since levels have already been historically low, the cut leaves little room for the Fed to maneuver in the event of a recession or other economic stumbling. So let’s see what the Fed’s rate cut in Rocklin means for home buyers.
Broad Implications of the Fed’s Rate Cut
In broad strokes, the Fed’s rate cut is only a marginally more favorable lending climate for home buyers in Rocklin. Nonetheless, it may prove more valuable for home buyers using other financing forms than the conventional 30-year fixed-rate mortgage.
According to analysts, the Fed’s rate reduction was intended to stave off the risk of economic downturn. But for many consumers, it is difficult to turn into additional mortgage savings. With the interest rate for a 30-year mortgage already below 4 percent, the change of the Fed may be more important for borrowers with other financing forms. The explanation for this is that the Fed has already lowered fixed-rate mortgage rates for 30 years in anticipation of this latest move. But home buyers with adjustable-rate loans will see more gain.
Nonetheless, the Fed’s rate cut means home buyers in Rocklin will have lower borrowing costs and be better able to cope with rising home prices. Here is an example: “Buyers who spend $1,500 on monthly mortgage payments can afford this year to buy a home of $402,500 compared to last year’s $367,500 when mortgage rates averaged 4.57%. Buyers would have had an extra $145 a month over $1,500 last year to afford a home of $402,500.
And in areas and communities where home prices are rising steeply, it can give you even more buying power. To know more about this, please contact your local agent.
What, Exactly, the Fed’s Rate Cut Means for Home buyers in Rocklin
There are three identifiable benefits the Fed’s rate cut will have for home buyers in Rocklin. These are:
As a home buyer, for unexpected expenses such as renovations and rising property taxes, you must have money set aside for down payment and closing costs and cash in reserve. And to get it, you’ll need to save the money. Cutting the Fed rate might help you do that.
Because the Fed’s rate cut is slight and comes on the heels of several rises over the past decade, it’s not as futile to try to save as it was when the Fed slashed interest rates to close to zero. For example, at the end of 2015, the average deposit certificate yielded an annual return of about 0.25%. But it’s closer to 1% now.
The Fed’s rate cut also means home buyers must look into some of the credible online savings accounts in Rocklin. Many of these pay rates surpass 2% and some need only a very small minimum balance to open an account (e.g. VARO).
Anticipatory Mortgage Rates
Usually, theoretical interest rates foresee and shift in the predicted direction of behavior of the Fed. The average interest rate for a 30-year mortgage was nearly 5%, not so long ago, but dropped to just over 3%. “The fall was tied to expectations that the Fed will cut rates,” he said.
The hope is that the Fed will again be able to cut rates, but keep in mind that mortgage interest rates are going to foresee this and rise even before the next step by the Fed. So for home buyers in Rocklin what the Fed’s rate cut means is that they can see the best interest rates for buying a home affordably very early.
The Fed’s rate cut also means that home buyers in Rocklin.
The Critical Time to Buy – Now and in the Near Future
All in all, the Fed’s rate cut means Rocklin for home buyers. Good news, good news. The news may not be as resoundingly positive as we would like, but for home buyers, particularly those interested in an adjustable-rate mortgage and especially just ahead of the anticipated cut this fall, things are still shaping up. Consult your local agent to find out if the time is right for you to buy a home.