Getting a mortgage should be slightly less painful in 2024.
On Wednesday, the Federal Reserve said it expected to cut interest rates three times next year. The Fed’s forecast brings a dose of holiday cheer to hopeful home buyers who have felt squeezed out of the market.
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In the last few years, the Federal Reserve has undertaken a series of interest rate cuts, leaving the federal funds rate at a historically low levels. These cuts have been welcomed by many consumers, who have benefited from more favorable mortgage rates, but what do these cuts mean for potential home buyers in 2024?
For starters, the low Federal Reserve rates of 2024 could be the perfect time to take the plunge in the housing market. Low rates mean that financing of a home could be more affordable than at any other time in recent years. For those looking to purchase a new home, the rate cuts will likely lead to a higher loan-to-value ratio, allowing borrowers to lock in lower rates and longer repayment periods.
Furthermore, the low interest rates could help spur an increase in new construction activity. As the cost of borrowing money goes down, developers can more easily finance the construction of new homes, further increasing the supply in the market. This could lead to a buyer’s market, where potential buyers can secure deals more easily and enjoy a greater selection of available homes when shopping for their dream residence.
Finally, home buyers in 2024 could be especially well-positioned to take advantage of adjustable-rate mortgages. Since these loans are tied to short-term interest rates set by the Federal Reserve, borrowers could benefit from low interest rates towards the end of a loan term.
The current low rates set by the Federal Reserve will likely lead to higher levels of home buying activity when the economy rebounds at the end of 2024. The combination of low borrowing costs and more homes on the market could create an ideal environment for potential buyers to make their move. Whether a person is looking to purchase their first or next home, the Federal Reserve’s actions could create the perfect window of opportunity into the future.
