Potential Federal Rate Cut

From what you pay on the balance on your credit card to inflation, rates can have an influence on our everyday lives. When the economy dips, rates tend to dip as well. This encourages people to spend more which gives the economy a boost. Jerome Powell, chair of the Federal Reserve, makes the big decisions when it comes to the federal fund rate and due to recent trade war news and the overall global economy, he’s hinting that rates could be decreasing soon.

But how will this affect your wallet? If you have credit card debt or plan to buy a home in the near future, the rate cut can be a benefit. Most credit cards that have variable rates are linked to the prime rate so a federal funds cut would lead to lower interest rates. The lower the interest rate on your credit card, the easier it will be to pay that balance down so be sure to take advantage.

Though the federal fund rate isn’t linked to mortgage rates, it can have an impact on them. Whether your mortgage is a fixed rate or an adjustable rate will determine the impact a rate cut would have on your savings. An adjustable-rate will generally decrease when the fed rate decreases but a rate cut would have no impact on a fixed-rate mortgage. Lower rates are beneficial for potential home buyers and with a federal rate cut, it would be a good time to purchase. Even if you’re not in the market for a new home it would be a great time to consider refinancing to take advantage of a lower interest rate! Please reach out to a Loan Officer near you to discuss all of your options!

FED Says No More Hikes

Recently, the Federal Reserve decided to hold interest rates steady and indicated that no more hikes will be coming this year. This is very encouraging to homebuyers looking to purchase a new home or to refinance their current mortgage.

Mortgage rates have been hovering around their lowest levels in more than a year, which in turn has seen an increase in the number of mortgage applications recently. Lower mortgage rates could potentially mean lower monthly payments for homebuyers, and less total interest spent over the life of the loan.

If you previously purchased a home with a high interest rate, it may be a good idea to speak with your loan officer to see if refinancing would be beneficial to you. You could save monthly and even possibly pay off your mortgage sooner. With the current low mortgage rates, the Refinancing Index was at its highest rate since January 2016.

Since mortgage rates have been so favorable the past few months, it is forecasted to be a strong spring buying season. With the current low rates and the abundance of products and programs First Home offers, it is possible to get a great deal on a home this year! Please reach out to a loan officer near you to discuss all your options.

Fed’s Halt on Rising Rates

The week of January 27, 2019, the Federal Reserve had its 2-day rate-setting meeting and decided not to raise interest rates. Although the Fed does not directly affect long-term mortgage rates, this is a positive outcome for borrowers looking to purchase a new home or refinance to a lower fixed rate.

Mortgage interest rates have been slowly declining over the last few months which is a good sign for buyers. The 30-year fixed-rate mortgage average was 4.45%, having stayed at that level for three straight weeks, and the Fed’s choice to leave interest rates unchanged could keep mortgage rates steady.* Lower interest rates could mean lower monthly down payments for home buyers, and less total interest spent over the life of the loan.

The Federal Open Market Committee (FOMC), which decides the Fed’s rate policy, said in its statement, “In light of global economic and financial developments and muted inflation pressures, the Committee will be patient as it determines what future adjustments to the target range for the federal funds rate may be appropriate to support these outcomes.” **

It is hard to predict what will happen in the upcoming months, but for now, things are looking bright for homebuyers. Please reach out to any of our Loan Officers if you have any questions, we are always here to help.

*Passy, J. (January 31, 2019) So the Fed left interest rates unchanged, but what does that mean for you? https://www.marketwatch.com/story/5-things-consumers-should-watch-for-now-that-the-fed-has-not-raised-rates-2019-01-30

**Foster, S (January 30, 2019) A ‘patient’ Federal Reserve signals it’s done raising interest rates — for now. https://www.bankrate.com/banking/federal-reserve/fomc-recap/

What Causes Rates to Fluctuate?

An interest rate is a percentage of the amount of a loan paid for the use of money for a specified time. More simply put, it is the rate of interest charged on your mortgage loan. Interest rates are volatile, meaning they can fluctuate sharply and regularly. There are many elements that affect your mortgage interest rate, some are caused from your personal and financial information, and other reasons are more universal, deriving from economic and governmental factors. Interest rates are always changing, and it is possible to see different rates while you are looking for your home.

It is common to see mortgage rates fall when the stock market declines, and vice versa; it depends on the reason for the movement. Most of the time, the cause is shifting expectations for economic growth based on newly released data. Stronger growth is good for stocks, but it raises the outlook for future inflation, so it is negative for mortgage rates, and the reverse is true as well.

Inflation may be a cause for fluctuating interest rates. The Consumer Price Index (CPI), a widely followed monthly report that looks at the price change for goods and services, measures inflation rates. It is calculated by taking price changes for each item of goods and services and averaging them. Changes in the index are used to assess price changes associated with the cost of living. Inflation causes higher prices for everything, including home loans. Lower inflation is positive for mortgage rates.

Mortgage interest rates are very susceptible to economic activity. For this reason, jobs reports, Consumer Price Index, Gross Domestic Product, Home Sales, Consumer Confidence, and other data on the economic calendar can move mortgage rates significantly.

Your credit score will be a factor in determining your mortgage interest rate as well. Your lender will determine your likeliness to pay back the loan by reviewing your credit score. The higher your credit score, the more likely you are to repay the loan, making you a candidate for a lower interest rate. On the other hand, if you have poor credit history and your score is below average, your interest rate will likely be a bit higher. The good news is there are ways to improve your credit. A simple start is to pay your bills on time, all the time.

Since rates can fluctuate, it is a good idea to lock in your rate when rates are low, and you are ready to purchase. A rate lock can protect you from rising interest rates while you are searching for a home. Once your rate is locked, it cannot change for a specified amount of time, even if interest rates increase. Interest rates are a hot topic and tough to track; get in touch with one of our loan officers to learn more about interests rates and the current market.


New Maryland Mortgage Program – 1st Time Advantage

The Maryland Mortgage Program (MMP) is offered by the Maryland Department of Housing and Community Development and provides borrowers with program options to purchase in the State of Maryland.  Currently, the MMP offers 30-year, fixed-interest rate mortgages while making down payment and closing cost assistance available to eligible homebuyers.  These assistance options make purchasing a home more affordable either in the form of a grant, or as a deferred, no-interest loan.

As of May 3, 2018, the MMP announced a new program – MMP 1st Time Advantage – that provides the lowest Maryland Mortgage Program interest rate to Maryland first-time homebuyers.  Additional features and requirements of this program are:

  • Down payment and closing cost assistance not available from MMP but assistance funds from external sources are allowed
  • Cannot be combined with other MMP products (including Partner Match, Homefront, HomeCredit or Refinance products)
  • Available to first-time homebuyers only (unless purchasing in targeted area or an honorably discharged veteran)
  • Homebuyer education required
  • Standard MMP eligibility applies

To learn more about the advantages of this program and other MMP programs, or how to get started, contact one of our Maryland licensed Loan Officers.

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