As most people expected, interest rates were cut in September by the Federal Reserve, but that doesn’t necessarily mean that mortgage rates are also falling because the two rates aren’t inextricably linked. That was evident in 2003, when the Fed adjusted rates thirteen times over a six-month period-eight times down and five times up-without any noticeable effect on mortgage rates You can learn more at Golden State Online California Real Estate .
Since consumers generally don’t understand that, however, they tend to become suspicious of lenders when mortgage rates don’t fall after a Fed rate cut. The simple fact is that mortgage rates are falling and rising according to how long-term inflation feels to investors.
It points out that those figures exactly mirror the half-point reduction that the Fed has just put in place, but it is still just a surprise, because interest rates still respond to the natural market forces in America. When the Fed lowers rates, it really responds to declining consumer interest rates within the economy, rather than the other way around, as most people think.
The Fed rate will also do nothing concrete to halt the fall in home prices in most parts of the country. Most experts predict that house prices will continue to decline, fewer new houses will be constructed, and existing home purchases in the foreseeable future will continue to be relatively slow.
During the current slowdown, the people in the most difficult situation are homeowners who got in with little down to their homes and took out an adjustable mortgage rate. They have recently experienced a double whammy, witnessing an increase in their interest rate while the value of their homes has fallen.
The real estate news is not all bad though. Since mortgage rates are still relatively low, and house prices have fallen, more and more first-time buyers are in a position to buy their first houses. The figure includes people who invested in the real estate market as they waited for just such a price correction. For them, the coming months may actually be the best time in years to finally get them out of the rent cycle and into their own homes which they can make pretty!