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Unless you are a financial analyst or someone with business-savvy, chances are you have not considered the effect the Fed changing interest rates will have on our economy. One of the most frequently asked questions recently after an announcement made by the President in his latest State of the Union address was “does this mean mortgage interest rates will be lower too?” The answer is no.
Still a Great Time to Buy – With Or Without Lower Fed Rates
Mortgage rates are already at their lowest they have been in decades. Similarly, housing prices are also at much lower rates. The positive buying market conditions remain but a zero Federal Reserve rate does not automatically translate to less expensive mortgages.
It does mean, however, that the institutions you borrow from will get better rates. Classic supply and demand principles at work, lower rates facilitate more big ticket purchases like homes and cars for more people, increasing the demand for subsequent items that are related to these purchases. The cycle goes on when consumers are able to pump more money into the economy as a result of having more in their pockets after securing lower interest rates.
Stronger Economy, More Jobs, More Homes Sold, Solid Economic Outlook
So, even though the zero Federal Reserve rate mentioned by Mr. Obama does not directly touch consumers’ mortgages, it really does have a positive impact in myriad ways. Consider this: when businesses are able to borrow easier and at better rates, they know they have more to gain in the future so they tend to invest more while getting such low rates. More investment translates to more jobs, more jobs mean more homes and cars and purchases and so on and so forth.
So the next time you come across a news piece talking about what the potential impact of lower fed rates could be on our mortgages, remember that however indirectly, the impact is a positive one even though you won’t be seeing anything lower from your lender than you’re already seeing today.
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Calling all Realtors or anyone interested in learning more about the 203k FHA renovation loan program. We’re holding a luncheon and training seminar on February 22nd.
If you’d like to come by, please RSVP to JModerski@gatewayfunding.com and we’ll get you set up with your reservation. It should be a lot of fun!
