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How Will the Fed Rate Cut Impact You?

This rate cut may feel like money in your pocket


Crofton real estate will probably be affected by the recent Fed rate cut of 3/4%, but you may be wondering who exactly is going to feel it in their pocket. 

I do not pretend to be a finance expert, or even a mortgage loan expert.  And I am certainly not qualified to give you financial advice – you should rely upon your own expert for that.  However, in the days since the Fed rate cut, I’ve been reading what others have to say about it and now I’m going to share some of their comments with you.  My own thoughts on the topic are in italics.


Crofton Home buyers

Any rate cut is good news for home buyers.

According to New Jersey lender Jeff Belonger, mortgage rates dropped a week before the Fed’s rate cut because of the foreign market’s decline of more than 9% and speculation that the US market would open “down” over 500 points the next morning.   Jeff indicates that mortgage rates did not drop any further after announcement of the Fed rate cut and, in some cases, they even increased. 

California real estate agent Ginger Wilcox agrees that rates went up, but she points out they also went down – In fact, some lenders have adjusted mortgage rates back and forth as many as three or four times a day.  In her Blog by the Bay, Ginger refers to the situation as Mortage Rate Ping Pong, and cautions that many lenders are hesitant to lock in loans right now.

A Bankrate article on MSN Money, Whom the Rate Cuts Help, Hurt, says that borrowers with good credit may benefit from the Fed rate cut, but not those with bad credit.  That’s such a general statement that any non-expert could have said that – and even elaborated to the degree that this article does – with confidence in its accuracy.  Certainly, in the current climate for sub-prime borrowing, only loans for good-credit borrowers are even available – Fed rate cut or no.  (Yet I did find that article interesting, and I recommend you click through to read it.

Gift from the FedThe perspective of Cyndee Haydon, a Florida real estate agent (who is participating in my upcoming “Who Wants to Move to Florida” event) is that Homebuyers Get a Gift Today – Now You Need to Claim It!  She points out that this drop of 75 basis points is the largest cut in years and  urges home buyers to take advantage of it now.

The greatest benefit to home buyers of the rate cut may be the sense of urgency it creates. Home buyers who are sitting back waiting for rates and prices to bottom out may decide to get out there and buy a home now.  Conditions are excellent now for homebuyers with good credit, and you won’t know when prices and rates hit bottom until it’s too late – when they start going up again.  My advice:  Don’t wait any longer!  When rates go up, your borrowing power will go down.


Crofton home owners with an Adjustable Rate Mortgage or a Home Equity Line of Credit

You may be the biggest winner of all!

House MoneyJeff Belonger points out that many home equity lines of credit (HELOC) are tied to the prime rate, which rises and falls with the Fed rate.  Therefore, any Crofton homeowner with a line of credit can look forward to a downward adjustment.  This same logic applies to anyone with an adjustable rate mortgage (ARM). 

The Bankrate article advises people with adjustable-rate mortgages to refinance now with a fixed-rate mortgage. This will lock in their payment for years to come, regardless of the future direction of mortgage rates.  

This rate cut, at the very least, probably bought Crofton home owners some time if they’re trying to sell their home now.  And, even home owners who are not moving benefit from any rate cut, if they have an ARM or HELOC.


Crofton home sellers –

You win if home buyers stop waiting and start looking.

Sold SignFor home sellers with an adjustable rate mortgage or home equity line of credit, this rate cut may provide much-needed relief.  At the very least, they probably don’t have to worry about payments adjusting upward before their home sells.

The greatest benefit to Crofton home sellers may be the deluge of advertising from mortgage lenders and real estate agents implying that the Fed rate cut equates to a lower mortgage rate and the resulting additional home buyers who enter the market place.

With such a huge inventory, it’s more important than ever for home sellers ever to their home priced right and show its best, including curb appeal.  If your home is on the market now, this would be a good time to dust off your goals and articulate them again to your agent.


The bottom line – How will the Fed rate cut impact you?  This Fed rate cut is good for the economy and, therefore, good for everyone.  It could benefit you personally if you are a home buyer, home owner with an existing adjustable rate loan or home equity line of credit tied to the prime rate, or if you have your home on the market now.


Ocean Beach


WHO WANTS TO MOVE TO FLORIDA – Celebrate F is for Florida in February with Margaret on February 7 at 7 p.m., and learn about life in Florida from several Florida real estate agents.  More information and reservations 


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