It’s rare for inflation to remain tame during periods of historically low unemployment, but according to Fed Chairman Jerome Powell’s congressional testimony, inflation remains below the Fed’s 2% target. Experts believe this likely means the Fed is considering a move to cut the rate that determines mortgage interest rates for home buyers. This is great news if you need or already have a mortgage and want to refinance. It means lower interest rates, lower monthly mortgage payments, and better terms may be possible by refinancing. Even more importantly, it means that housing prices still have room to rise.

Why Chairman Powell feels inflation remains tame

Unemployment is at a 50-year low in the United State, with opportunities in the labor market finally reaching those who can benefit the most. Wages are also increasing across the board and are healthiest among the lowest paid workers.

To further illustrate his point, the gross domestic product experienced 2.1% growth in the second quarter of the year. The U.S. economy is enjoying its 121st consecutive month of growth as it celebrates one of the longest expansions in recent history. The bottom line is that people have more money, the economy is healthy, and it’s only getting better.

Sustaining the current economic expansion through maximum employment and price stability seems to be the ultimate goal for the Fed. The Fed Chairman, Jerome Powell hopes to continue developing a high-pressure labor market by holding unemployment down.

Although, the Fed made a preemptive rate cut for the first time in a decade last month, fears of trade disputes weigh on corporate confidence and fuel the Fed’s fears of an economic turndown. By reducing rates in July and possibly again this month, the Fed seems to be trying to avoid a job-killing recession. These actions are also heating up the housing market.

How low interest rates impact the housing market

The housing market remains solid, 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.

Housing prices are poised to start rising, though. The average 30-year mortgage rate has never dropped below 3.3% and has now fallen to 3.75%. The Fed also warns that the effects of lowering rates often takes time to be felt in the economy.

How mortgage borrowers benefit from rate cuts

Lower interest rates make homes more affordable because it costs less to borrow money, which also lowers your monthly mortgage payment. 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.

Is your credit ready to buy or refinance your home?

If you are a prospective home buyer, or you are considering refinancing your current mortgage, now is the time for you to act before home prices and mortgage rates start rising again. You need to immediately check your credit reports and look at your FICO® scores to make sure they are ready for the process.

Contacting BoostMyScore can help you improve the utilization ratio, average age of revolving accounts and even the actual credit scores on your credit reports. It’s all backed by our money-back-guarantee, which means you can improve your credit profile and score, just before taking advantage of the interest rate cut, potentially saving hundreds of dollars a month on your mortgage payment.