December 4, 2019

What the Federal Reserve Rate Cut Means For You

Today we’re talking about the Federal Reserve!

Don’t leave yet—we promise we’re talking about mortgages.

We’ve been getting this question often recently: “Hey, I heard that the Federal Reserve just lowered the prime rate, so that means my mortgage rate is going down, right?

Well…not necessarily.

That statement is just like saying, “The stock market’s going up, so therefore my house is worth more.

You might be able to infer a correlation—if the stock market’s going up, the economy is doing well, and therefore, houses are worth more—but it’s not a direct relationship.

That same logic applies to the Federal Reserve rate. That rate is a short-term rate, from one bank to another, which happens in less than twenty-four hours. Mortgage rates are based off mortgage-backed securities, which are a thirty year bond. That’s a pretty big difference.

The most recent drop, however, was an example where we saw mortgage rates drop in tandem with the Federal Reserve rate. That doesn’t mean they’re always going to move together.

The best way to find out what’s happening with mortgage rates—and what that means for your mortgage—is to give us a call.

Watch our video on this topic here.