According to Fed Chairman Jerome Powell’s congressional testimony, inflation remains below the Fed’s 2% target, and has indicated the Fed is considering cutting interest rates. This is excellent news if you have a mortgage. It means a lower rate may be possible through a refinance. Even more importantly, it means that housing prices still have room to rise.
Unemployment is at a near 50-year low with opportunities in the labor market, finally reaching those who can benefit the most such as people with disabilities. Wages are increasing across the board and are healthiest among the lowest-paid workers.
To further illustrate his point, the gross domestic product experienced a 2.1% growth in the second quarter of the year. The U.S. economy is enjoying its 121st consecutive month of growth as it enjoys one of the longest expansions in recent history. The bottom line is that people have more money, and the economy is healthy.
Sustaining the current economic expansion through maximum employment and price stability seems to be the ultimate goal. Powell hopes to host a high-pressure labor market by holding unemployment down.
Although the Fed made a rate cut last June for the first time in a decade, fears of trade disputes weigh on corporate confidence and fuel the Fed’s concerns of economic turndown. By reducing rates now and possibly again in the fall, the Fed seems to be trying to avoid a job-killing recession. They are also heating up the housing market.
The housing market remains stable, and the possibility of more rate cuts could boost inflation and extend economic expansion. Even the mere expectation of further rate cuts can prompt a rise in the demand for housing. The housing demand brought on by lower interest rates eventually increases supply. More homes are built since the cost of borrowing is lower and construction loans are cheaper.
The average 30-year rate has never dropped below 3.3% and has now fallen to 3.75%.
Lower interest rates make homes more affordable because it costs less to borrow money. People are more likely to take out new mortgages and refinance older, more expensive ones while prices are low. Even buyers who are just over the debt-to-income threshold may now be able to purchase a property they would not have qualified to finance in the past. While the rate cuts do make single-family homes more affordable, those with adjustable-rate mortgages and commercial real estate loans are likely to benefit the most.
Now is the time for prospective home buyers to act before home prices start rising again. They need to pull out their credit reports and look at their FICO® scores. Contacting BoostMyScore is a great place to go next, as adding credit tradelines to a credit report can help them improve their utilization ratio, the average age of revolving accounts, and even their actual credit scores. The credit tradelines are guaranteed to appear in less than 60 days, which means people now have a better chance to take advantage of the interest rate cut, potentially saving thousands.
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