The Fed announced that it will lower the benchmark rate by 0.25%, to 2.0 to 2.25%. For most people, that sounds very, very tiny. Could it possibly affect Utah real estate at all? It depends on which experts you’re talking to. Some feel like it’s too small and was already anticipated, so it’s not going to make much of a difference in the real estate market. Then there are the people who think the rate cut will actually raise mortgage rates by increasing inflation and helping the economy to expand. Some economists worry that the rate cut will signal to consumers that the economy is on shaky footing, which could cause concerns about buying a house. Other experts believe the Fed rate cut will have several positive effects. It feels a bit like that story about the Chinese farmer who greets each new event with a philosophical, “Good news, bad news, who can tell?”
Good, Bad, or Indifferent--What Does the Fed Rate Cut Change for Consumers?
Let’s talk about some of the possible positives about the rate cut. For starters, it could bring down mortgage rates, at least in the short term. This is good news for people with adjustable rate mortgages and also for those who are thinking of refinancing. Now will be a great time to lock in a low rate. Even though a quarter of a percentage point doesn’t sound like much, over the life of a loan, it does add up.
Another possible positive? Since the cost of borrowing might come down, it could mean that we’ll see more single-family homes being built. Some Utah real estate markets, like Salt Lake City, have a real problem with affordability, and more supply could help with that. Especially for first time buyers, who usually have the hardest time qualifying for a mortgage and saving a down payment.
Good news, bad news, who can tell? We’ll be watching the market like a flock of hawks to see what does actually happen.