How a Fed rate cut could impact the housing market

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The Federal Reserve will hold a two-day policy meeting this week, where the central bank is expected to announce another cut to its benchmark interest rate.

That could bring some good news for prospective homebuyers.

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While the Fed does not control mortgage rates, it sets the federal funds rate, which can affect them.

If the Fed cuts the benchmark rate by 25 basis points – as expected – it may not impact the housing market too significantly.

“If the Fed does the quarter-point cut, I don’t expect any meaningful movement in mortgage rates,” Lawrence Yun, chief economist of the National Association of Realtors, told FOX Business.

However, if the Fed were to cut the rate by 50 basis points, Yun said that could cause the mortgage rate to slide down, which would be good for consumers and homebuyers.

Yun previously predicted the 30-year fixed mortgage rate could fall to 3.3 percent by the end of the year.

A weaker-than-expected jobs report in August has contributed to predictions the Fed will cut interest rates on Wednesday, when it issues its statement. The U.S. economy added 130,000 jobs last month, below expectations of 158,000. The number also reflected hiring of temporary workers.

The U.S. is also locked in an ongoing trade war with China, which has generated uncertainty about both domestic and global economic growth.

And geopolitical stability came into focus over the weekend following an attack on Saudi oil facilities, which disrupted more than 5 percent of the global oil supply.

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President Trump has been pressuring the Fed to cut interest rates, doing so again on Monday.

Despite low mortgage rates, buyers have still largely been hesitant about making purchases. They are expressing interest, however, as mortgage applications rose 2 percent for the week that ended on Sept. 6 – according to data from the Mortgage Bankers Association.

Source: Fox Business

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