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The Federal Reserve makes biggest rate cut in 16 years in September

Last week the Federal Reserve followed through with its much-anticipated interest rate reduction as expected by many Wall Street analysts.

On 18 September, the central bank approved a fifty-basis point rate cut, marking its first reduction since the pandemic, and the largest single rate cut in 16 years.

In response, mortgage rates started declining ahead of the Fed’s decision, giving a boost to the residential housing market.

The National Association of Realtors chief economist Lawrence Yun commented on the Federal Reserve’s rate cut move saying: “The Fed’s half-point rate cut decision is the beginning of six to eight rounds of further rate cuts well into 2025. The very next cut will occur after the presidential election.

“The justification is cooling inflation in recent months and lighter job gains. Mortgage rates have already anticipated the Fed’s likely path. That is why the 30-year rate has fallen by 150 basis points from early in the year to today. Any further decline in mortgage rates will be minimal.

“Due to the already low mortgage rates compared to spring, the purchasing power for home buyers has been lifted by around $50,000 for those with a $2,000 monthly mortgage payment budget. Consumers who were priced out due to earlier higher mortgage rates could now be back in the market.”

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