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WednesdayOctober 4, 2023

Stocks ended Wednesday’s trading session lower after the Federal Reserve announced it would pause rate hikes for now. However, they suggested more hikes were on the horizon and that rates may remain higher for longer than previously expected. Central bank officials said they would hold rates steady at their highest rate in 22 years but predicted that there would be at least one more hike this year and that cuts in rates wouldn’t begin until June of 2024, later than previously signaled. Here with this month’s Mortgage Update are The Agency’s partners at New American Funding.

What does the Fed’s latest move mean for buyers and sellers?
Elevated rates will continue keeping inventory low as prospective sellers refuse to give up their pandemic-era interest rates for today’s 22-year-high interest rates. Buyers are encouraged to take advantage of the slight dip in demand due to the higher interest rates. The low supply and steady demand will likely continue putting upward pressure on home prices. There is no data to support waiting on the sidelines in hopes of a massive correction in home prices

What is the Fed looking for to begin lowering interest rates?
The economy has shown incredible resilience despite the higher interest rate environment of the last 12 months. The Fed has zero incentive to lower interest rates as unemployment remains low and housing prices continue to rise. The Fed’s initial fears of a recession have now turned into a projected “soft landing” and are less fearful of the bottom falling out of our economy. A key indicator to keep a watchful eye on is the unemployment rate. Once we see unemployment going up, we will likely see the Fed reverse course and begin easing its monetary policy, resulting in lower interest rates.

Are there any positives with these higher interest rates?
Savers and people with surplus cash still have many opportunities to get a far better return on their money than they’ve had in years—and even more importantly, a return that outpaces the latest readings on inflation.

Are there any loan programs that help ease the pressure of today’s higher interest rate environment?
The “Buy Down” program is a great solution for today’s higher interest rates. The “Buy Down” program allows a borrower to make a payment based on a discounted interest rate for a temporary period, typically 1-3 years. This can result in substantial savings for the borrower with payments based on an interest rate that is up to 3% lower than the initial note rate. The temporary interest rate Buy Down is typically covered by the seller, through a seller concession and can dramatically reduce the cost of initial mortgage payments.

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