Rate Update: Interest Rates are Close to Historic Lows

All of the talk lately has been about the Federal Reserve’s decision to cut the benchmark interest rate for the first time in a decade. However, if you’ve been paying attention, you’ll know that the low mortgage interest rates have been the real story for the past few months as the rates have now fallen below the 4.0 percent mark. Yes, the Fed’s recent rate cut is important—particularly if you have an adjustable-rate mortgage or home equity line of credit—but if you’re looking to buy or refinance, the current interest rate is more important.

Let’s look at how the interest rates have been trending and what may be in store for the rates in the coming months, with an eye on the Fed’s recent rate cut and possible future rate cuts.

According to Freddie Mac’s Primary Mortgage Market Survey, the rates on a 30-year fixed-rate mortgage have been trending down since the beginning of the year. As a matter of fact, the highest rate came in the first week of the year: 4.51 percent for the week of January 3.

Overall, the rates on a 30-year fixed-rate mortgage have fallen about a full percentage point over the past eight months and are down close to 1.5 percentage points since November 2018, when the rates were just below 5.0 percent. Currently, the rates nationally are entrenched well below the 4.0 percent mark and are the lowest they’ve been in close to three years.

The outlook for interest rates is, as usual, a bit murky. With rates so low right now, will we finally see them begin to rise? Possibly, but with Europe’s slowing economy and the ongoing trade war with China, we could actually see the rates go even lower, at least in the short term. Concerns over the continued growth of the U.S. economy—as evidenced by the Fed’s recent rate cut—may also apply downward pressure to the rates.

As we mentioned, the Fed’s cut of 1/4 of a percentage point to the federal funds rate in late July is important, but the impact on fixed-rate mortgages may be negligible. Why? Because the Fed’s rate cut was relatively small and because interest rates on fixed-rate mortgages aren’t directly tied to the federal funds rate. However, adjustable-rate mortgages and home equity loans are tied to the federal funds rate, so we should see a drop in the rates on those types of loans. More rate cuts—which the Fed has hinted at—could play a role in pushing the rates on fixed-rate mortgages down, but that may be more of a result of overall economic conditions rather than the actual rate cuts.

In the end, it’s difficult to predict whether interest rates will go up or down in the coming months, but the fact remains that rates are extremely low now, so if you’re looking to buy or refinance, now is the time.

For more than 25 years, Omega Financial has been serving mortgage clients in Massachusetts. Our brokers have approximately 50 years in the mortgage business. You always will receive fast, courteous, and accurate information. Omega Financial, Inc. is a company duly licensed to operate in Massachusetts as a Mortgage Brokerage. We are located in the Town of Norwood, Massachusetts where we have been operating as Omega Financial Incorporated since 1988.

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