LaPorte Group Blog

Today we got the expected half point rate cut. The Fed has now lowered the Fed Funds rate to the 2004 level. You can read the Fed Statement Here.

Now I want to discuss what happened on the market after they lowered the rates for the second time in a week and a total of 1.25%.

What has been happening when the Fed has lowered rates is we see an immediate drop in our mortgage rates, then one or two days later, rates move up to levels even with or slightly higher than they were before the rate cut.

The reason for this is that lenders see rate cuts as inflationary. When there is inflation money is worth less in the future, that's why bread used to cost 25 cents instead of $2. The lenders want to protect the money they are lending out and want a larger interest rate for a 30 year fixed or a 15 year fixed rate loan. That is what we are seeing here the last 2 weeks. Last Tuesday we had rates that I have only seen when I first got in the business, then they went up more than I have ever seen in one day.

The main thing to remember is that we still have interest rates that are extremely low, both historically and compared to the last 2 years.

If you or anyone you know has any questions about financing, please feel free to email or call and I will answer any questions you may have.