The Federal Reserve Announced last week that it was lowering its benchmark federal funds rate by a quarter of a percentage points to 2.25 percent. This is the first rate decrease since 2008. Although it was widely expected, the move by the central bank will have widespread implications.
While changes in the federal funds rate is not directly linked to long-term rates like mortgages, it is often affected by such changes. Fixed mortgage rates have fallen over one percentage point since last November as economic growth began to slow. Because of the downward trend already happening with mortgage rates, last week’s rate cut will likely have little impact on fixed rate home loans.
Variable-rate mortgages, on the other hand, as well as home equity lines are based on short-term rates and will be positively impacted by the new lower rate.
Today, conforming no-point 30-year fixed mortgage rates are averaging 4.00 percent and 15-year rates are near 3.375 percent.
Do you have a question for Real Estate & Mortgage Analyst Mehran Aram? Submit your queries about a home purchase, refinance, or reverse mortgage via Aramco.Biz, social media (#AramcoReport), or over the phone at (866) 381-8888 and your questions may be featured in an upcoming article.