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What you need to know

The Federal Reserve recently announced a cut to interest rates in an effort to support the economy. Here is what you need to know about the interest rate cut and its impact on your mortgage rate.

What does the interest rate cut mean for me?

  • The Federal Reserve cutting interest rates is a short-term overnight bank-to-bank lending rate. This does not have a direct impact on the mortgage interest rate.
  • The interest rate cut will lower rates on credit cards, home equity loans, auto loans and other consumer loans that are affected by the prime rate.

What will this mean for my mortgage rate?

  • It could mean a drop in interest rates, but it could also mean the rate may increase. If the stock market rallies, it may actually cause mortgage interest rates to increase.
  • Mortgage rates are based on the MBS (mortgage-backed securities) market, which is independent from the Treasury bond as well as the stock market. The MBS will typically react within certain tolerances of the Treasury bond and stock market.

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