Fed surprises with September rate slash
What happened:
In a surprising move, the Federal Reserve announced a larger-than-expected .5%, or 50 bps, cut to the federal funds rate after the September Meeting of the Federal Open Market Committee (FOMC). Many Fed-watchers had been expecting a 25 bps cut, so the decision definitely raised some eyebrows. The federal funds rate will lower to a range between 4.75-5%, the lowest it’s been in almost two years.
Fed Chairman Jerome Powell, in comments following the meeting, pointed to the Fed’s dual mandate of employment growth and economic stability as the reason such a big cut was needed. “We’re trying to achieve a situation where we restore price stability without the kind of painful increase in unemployment that has come sometimes with disinflation,” Powell stated.
What it means:
While the size of the rate cut was surprising, the path forward that Powell spoke to in his press conference does line up with what most economists were expecting. It appears as if the federal funds rate will continue to lower to a range of 4.25% to 4.5% by the end of this year. The Fed’s two remaining meetings for the year are scheduled on Nov. 6-7 and Dec.17-18. Traders are going to start pricing in the probability of further cuts at those meetings.
Powell said, “We’ve waited. And I think that that patience has really paid dividends in the form of our confidence that inflation is moving sustainably under 2%, so I think that is what enables us to take this strong move today.”
How this affects homeownership:
Mortgage rates had been coming down since the last Fed meeting in July, and the Fed’s September decision will likely keep that trajectory going. In notes released following the meeting, the committee shared expectations of further rate cuts this year. Remember, however, that the Fed’s rate is not the same as your mortgage rate.
With rates potentially dropping now and in the near future, it’s a great time for homeowners to think about refinancing their mortgage. If you’ve been wanting to buy a home, this could be the perfect moment to get serious about your search. As more people enter the market, finding the right home might get more competitive. That’s why it’s a smart move to get pre-approved for a mortgage now and start working with a Loan Officer to make the most of these changing rates.
Applicant subject to credit and underwriting approval. Not all applicants will be approved for financing. Receipt of application does not represent an approval for financing or interest rate guarantee.
Refinancing your mortgage may increase costs over the term of your loan. Restrictions may apply.
Your journey home begins here.
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Applicant subject to credit and underwriting approval. Not all applicants will be approved for financing. Receipt of application does not represent an approval for financing or interest rate guarantee. Restrictions may apply, contact OriginPoint for current rates and for more information. All information provided in this publication is for informational and educational purposes only, and in no way is any of the content contained herein to be construed as financial, investment, or legal advice or instruction. OriginPoint LLC fka Guaranteed Rate Affinity, LLC does not guarantee the quality, accuracy, completeness or timelines of the information in this publication. While efforts are made to verify the information provided, the information should not be assumed to be error free. Some information in the publication may have been provided by third parties and has not necessarily been verified by OriginPoint LLC fka Guaranteed Rate Affinity, LLC. OriginPoint LLC fka Guaranteed Rate Affinity, LLC its affiliates and subsidiaries do not assume any liability for the information contained herein, be it direct, indirect, consequential, special, or exemplary, or other damages whatsoever and howsoever caused, arising out of or in connection with the use of this publication or in reliance on the information, including any personal or pecuniary loss, whether the action is in contract, tort (including negligence) or other tortious action. OriginPoint does not provide tax advice. Please contact your tax adviser for any tax related questions.
