Friday Fun Facts – Does the Federal Reserve affect Mortgage Rates?

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The federal funds rate and mortgage rates are both types of interest rates, but they operate differently. The Fed directly controls the federal funds rate, which primarily influences short-term interest rates, while mortgage rates are determined by lenders based on long-term bond yields and various economic factors like inflation and market demand. This means that while both rates can move in the same direction, they don’t always do so. For instance, when inflation rises, mortgage lenders may increase rates to protect their returns, even if the Fed lowers its rate. This nuanced relationship reflects differing priorities: the Fed balances inflation with job market stability, while lenders focus on the erosion of their future payments. Historical data supports this divergence, illustrating that Fed rate changes don’t consistently correlate with mortgage rate adjustments.

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Friday Fun Facts – The 1651 Day Wait is Over

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It’s been 1651 days since the Federal Reserve last cut rates.

During this era of rising rates, we’ve seen:

  • Mortgage rates peak at nearly 8% in October 2023
  • Existing home sales plummet to 1995 levels
  • Home affordability hit a 40-year low

So when we got the news this week that the Fed was cutting interest rates by 0.55%, we were elated.

Not because this single interest rate will dramatically decrease overnight – but because this signals that this is only the beginning and not the end of interest rate cuts.

What to expect – more buyers, increased competition.

To help you navigate the process of buying or selling your home, please reach out to your Windermere agent.

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Friday Fun Facts – It’s All About the FED

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You may have heard that the Federal Reserve Board (FED) is meeting next week – so what does that mean? Think of the Fed lowering interest rates like a store putting items on sale. When prices drop, people are more likely to buy things. Similarly, when the Fed reduces interest rates, borrowing money becomes less expensive. This encourages people to take out loans for homes, cars, or businesses, and helps boost the economy by making it easier and more appealing to spend and invest. It’s like making the cost of borrowing money more affordable, which gets things moving!

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Best Time to be a Buyer in 10 Years

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As we move into the fall, the real estate market is providing a rare opportunity for buyers who have been waiting on the sidelines for years. Inventory levels are higher than they’ve been in a decade, and sellers are increasingly open to negotiations, making repairs, offering concessions, and even accepting contingent offers to close deals. This presents an exceptional chance for buyers to leverage their negotiating power before potential rate drops lead to increased competition in the marketplace.

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