What the Fed Really Did
– from one of our favorite mortgage voices, David Reed, CD Reed Mortgage Bankers, Austin
The 1/4 point Fed Funds rate cut was expected. The Fed did what was expected of them. Mortgage lenders had anticipated such a move and had priced that 1/4 cut in some time ago. Rates moved down just a tad yesterday but it wasn’t because of the cut.
The Fed barely mentioned inflation yet signaled that their new mission was to support the Dollar. By only cutting the rate 1/4% they kept inflation watchers happy by not cutting more.
If the Dollar strengthens against other currencies we could not only see prices begin to fall for all products from unleaded gas to Corn Pops we could watch mortgage rates drift downward further still.
This without any Fed action. This means that rates could, could dip below 5.50% or lower over the next several weeks. A lot has to happen but it’s possible, especially so since the Fed has indicated while it might drop rates again they’re less likely to do so. By halting the Fed Funds rate cuts while at the same time supporting the Dollar we’ll help mortgage rates.
Employment numbers need to stay soft while wages are kept in check. Currency traders need to start buying Dollars again and core inflation needs to dip below 2.00%. That’s a lot to ask but it’s not out of the question.
What does that mean to you? If rates drop below 5.50% and stay there we’ll open the window of opportunity for a brand new batch of buyers that will suddenly qualify for loans that couldn’t qualify before.
And we all want that, right?
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