This week’s Federal Reserve 50-basis-point robust cut sets the tone for lower mortgage rates. Chair Jerome Powell used the term “recalibrate” nine times during his Q&A after the cut. First and foremost, this cut had been telegraphed for some time and was already factored into the market. Mortgage rates roughly track the 10-year treasury note, which is outside the Fed’s direct control. In fact, rates worsened a small amount after the announcement. The good news is that rates have gradually declined over the past six weeks, and many products are sub-6%.
What should we do as borrowers? Understand the new mindset of the interest-rate complex: rates will slowly decline, manifesting with many small incremental ups and downs. It’s important to have loan packages completed and approved in order to take advantage of any dip. Any hint of inflation picking up will likely dampen short-term follow-through. As the cliché goes, “a bird in the hand is worth two in the bush.”
None of us has clear insight into where rates will be in the next 3 to 6 months. We strongly feel the important factor is being preemptive and ready to “pull the trigger” when appropriate. If rates move down more after we close, our company policy is to refinance at no cost to you. Historically, these concepts translate to increased real estate prices, further fueled by extreme amounts of liquidity waiting on the sidelines and tremendous pent-up demand.
Conforming loan limits
- 1 Unit: $802,650
- 2 Units: $1,027,750
- 3 Units: $1,242,250
- 4 Units: $1,543,900
With that said, stay tuned!