A half-point rate cut would send a signal to the market that the Fed is serious about reversing the “lock-in” effect that makes homeowners with low-rate mortgages reluctant to sell in a high interest-rate environment. If the Fed reverses course as aggressively as it raised rates, financing costs would go down, creating a flood of inventory of existing homes and taking some heat off prices.
The Fed can’t build houses, but it can — by indirectly influencing mortgage rates with its benchmark rate — make the prospect of selling more appealing for homeowners. Already, market anticipation of a rate cut at the September Fed meeting has brought mortgage rates down to 6.2% last week, from 6.7% at the beginning of August.- CNN Reports.
Now, the half point would surely help to cut borrowing cost and help the lenders to bring down rates. As I was saying to many of my investors and clients, I am expecting the rates to drop to 5.5% by end of end of year for 30 year mortgage.
Also many current homeowners don’t want to put the house in the market because they are locked in lower mortgage rates don’t want to sell it and buy another house in higher rate. This should ease up a bit and have them come out of the shell which will increase the inventory to ease inventory crisis.
We are hoping this start of mortgage rate correction and hope to boost the housing demand crisis and help the next year Real Estate market. Let’s wait and watch…
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