We are officially in a new economic cycle. The long-anticipated September Federal Reserve meeting brought news many economists had predicted: the Federal Reserve lowered its Federal Funds Rate by 0.5%. This marks the first cut since March 2020. The Fed Funds Rate is the rate at which banks lend to each other overnight. Lowering this rate stimulates the economy by reducing credit card rates, promoting hiring, and keeping unemployment low. However, it may also lead to lower yields on savings accounts and certificates of deposit.

Historically, a declining Federal Funds Rate correlates with lower mortgage rates. This is good news for the housing market.

A Time for Opportunity

A new economic cycle brings new opportunities. If you’re considering buying, now is a great time to reassess your purchasing power; you may afford more home this year than last. For homeowners, it’s an ideal time for a refinance analysis. If you bought at a higher rate in the past few years, you could lower your interest rate now. However, if you’re currently buying or refinancing, be aware that the market remains volatile. While mortgage rates generally trend downward, they fluctuate with the stock market and react to various economic indicators, often moving by 0.25% or more daily.

Follow the Trend

Mortgage rates have been steadily decreasing over the past three months and even more over the last year, in anticipation of the 0.5% federal funds rate drop. Over 65% of economists had predicted this cut, causing mortgage rates to respond ahead of the meeting. After peaking over 8% in early 2023, rates have settled into the low 6%s, indicating a positive trend for the future.

Exercise Caution

Be aware of a prospecting tactic called trigger leads. These are lists that lenders can purchase to solicit homeowners or homebuyers. Some solicitors misuse the Federal Funds Rate drop to mislead consumers into thinking mortgage rates have dramatically decreased, which is not entirely accurate. While purchasing trigger leads is legal, there is a push for further consumer protection. The vast amount of information available through AI raises concerns about privacy and the potential misuse of data.

Advice from Applied Mortgage

If you’re a buyer who has paused your search, now is a great time to re-enter the market. With rates down over 1% since last year, payments may feel more manageable, and you might have increased buying power. Whether buying or refinancing, consider locking your mortgage rate at the time of application to mitigate market volatility risks. Timing the market is challenging, so focus on being comfortable with your payment. Remember, refinancing may be an option in the future if mortgage rates continue to decline. Additionally, to avoid trigger lead solicitations, consider registering for the Do Not Call list at donotcall.gov.

If you’re looking to purchase or refinance, contact us for a trusted local mortgage analysis with our team.