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Another Rate Drop – What Does it Mean to You?

Last week the Federal Reserve cut short-term interest rates for the third time in 2019. After the previous cuts in July and September, this brings the federal funds rate to a range around 1.5% to 1.75%. The federal funds rate refers to the interest rate at which banks (and credit unions) charge other depository institutions for lending them money from reserves on an overnight basis.

With another quarter-point drop, the cost of borrowing just dropped as well, which makes things interesting for those looking to buy or refinance a home.

The experts admit the rate reduction brings with it a mixed message about the state of financial affairs in the U.S. The national economy continues to grow and the job rate remains strong, however an eye on global trade tensions and other overseas weaknesses impacted the decision. While the Fed will often cut rates to stimulate the economy, they reiterated that in spite of this recent change that they expect it to continue expanding and the labor market to remain robust.

What it Means for Borrowers

With this latest cut, it’s a great time for consumers to see how a lower rate could make a mortgage more attainable. If you already own, a lower interest rate is one of the best reasons to refinance your current loan. We at EnTrust Funding (ETF) agree that the incentive has definite merit if you can reduce your interest rate – especially in a strong housing market that continues to increase home equity.

The interest cuts can also make a nominal impact on credit card balances and student loans, and consolidating those debts through a cash-out refinance may capitalize on current equity for future plans. Homeowners who have been sitting on plans to remodel or make minor improvements could find this a great time to refinance for the necessary funds, either through conventional or FHA.

Those now holding adjustable rate mortgages will likely see a difference right away, but depending on their current rates and potential plans for staying in the home, they may want to discuss the possibility of refinancing to a fixed rate.

The recession buzz remains muted, but experts agree there could likely be a slowdown in the coming year or two. Fortunately, the team at ETF can help determine if the Federal Reserve’s recent announcement plus economic forecasts could create a financial opportunity for you. We provide a full book of mortgage services as well as years of experience and knowledge in which to guide borrowers. Give ETF a call today to discuss your needs and timeline.

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