Can someone explain what .5% rate cut means to the mortgage rates to first time homebuyers?
In: Economics
Are you still in a fixed rate period? Yes? Then it means nothing to you at the moment. Ignore it.
Are you about to end your fixed rate period, or are you already on a variable rate? Then your mortgage will get slightly cheaper than it otherwise would have been. Very slightly.
Do you have any control or choice over this whatsoever? No. The rate is the rate. It could go up tomorrow. You might already have a much higher rate on your mortgage when you leave the fixed rate period, etc. Whatever the rate is – you’re gonna have to pay it.
The only thing you can do is “fix” your rate for X years at some point. And then if the rate goes down? Tough luck. If the rate goes up? You’re doing okay. Either way, neither will affect you until the fixed rate ends.
Historically, interest rates are excellent right now. We all got spoiled with the 3% rates.
Any little bit does help but don’t hold out for a 3% rate. The quicker you can get into a home and make the payments, the quicker you will build up equity. With that being said, be careful of “creative” lending.
Good and bad for buyers. Good in that mortgage interest rates will go down which means less money you have to pay on interest for a home which can be big savings over the term.
Bad in that demand will go back up for homes which means home prices will go back up.
The 50 basis points announced today aren’t *directly* related to mortgages. Mortgages are more closely tied to the 10-year Treasury yield. Eventually, it trickles down, but it’s not usually immediate and does not necessarily have the same cut amount.
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