By Brad Bennett,

President

Columbus Board of Realtors®

For the first time in more than four years, the Federal Open Market Committee this week lowered its target for the federal funds rate 50 basis points to 4-3/4 percent.

 

Many believe that, when the Fed slashes its rates, mortgage interest rates drop. Although this can occur, generally this is not the case, but it is good news for housing.

 

The recent half point cut was intended to induce lenders to say yes more often – especially to jumbo borrowers, who have applied for mortgages greater than the conforming limit of $417,000.

 

Lately, lenders have become more reluctant to extend jumbo mortgages, because investors are scared of buying packages of jumbo loans for fear of the quality of the loans. That’s what froze the jumbo market, and observers believe the Fed is trying to thaw it out by making it cheaper for lenders to borrow.

 

Making borrowing  more affordable will make money more available and this will have a positive affect on the housing market.

 

Will this translate to lower interest rates? No one knows. But here’s what we do know!

 

  • Interest rates are near 40-year lows.

The current interest rates of 6.5 percent are extremely favorable for buyers, near historic lows, and likely to go up in the future.

 

  • Home priced don’t necessarily move in unison with interest rates.

So, if  you wait to purchase a home, and the price drops $10,000, you could end up losing money. How? If interest rates were to move up a half-a pointduring this period, the savings on the reduced home price would be more than offset by the higher monthly payment you would be making over the life of the loan.

 

We know that:

  •  Interest rates are low today.
  • Home prices are down.
  •  There are  plenty of homes to choose from.
  • Sellers are willing to bargain and builders are willing to offer attractive incentives.
  • These favorable variables could change for the worst.

 

Now is a great time to buy!