Technically, The Fed's decision in July to lower interest rates by a quarter-point doesn't directly affect mortgages. In reality, there are usually some things to keep in mind with any rate decrease or increase.
The Federal Funds rate is a measure of short-term borrowing, or the rate that banks use to lend money to each other. Mortgages are long-term notes.
If you have an adjustable-rate mortgage, you'll probably see your interest rate go down when there's a cut. To put that in perspective, a Bankrate article said that a HELOC (home equity line of credit) of $100,000 rises or falls about $250 a year with every change of 0.25 percent in interest rate, up or down. That works out to about $21 a month.
Additionally, variable-rate mortgages usually adjust annually, on their anniversary dates, and some don't adjust at all for the first two to seven years.
However, this could be a good time to refinance into a fixed-rate mortgage and lock in the historically low rates. The average rate on a 30-year mortgage fell to 3.75 percent, down from a high of almost 5 percent in 2018.
Do a little math to figure out your savings over time, as well as closing costs, to determine whether this is a good move for you.
Rick Good spent ten years in the newspaper business, including with The News & Observer (Raleigh, NC) and The Greenville News (Greenville, SC). He co-wrote, with Melinda Coleman, Rutledge to Riley: Governors of South Carolina, 1776–Present (Published by The Greenville News), and is the author of Mind Games Trivia #1 (Amazon). He has recently spent 15 years creating original trivia content through Sounds Good Mobile Entertainment and continues that with his new company, SGME Software. He edits The Smart Reader’s money, real estate, and business coverage.