This week, the Federal Reserve announced a quarter-point interest rate cut, and while that may sound like financial jargon, the impact on the housing market can be very real. Why? Because changes in the Fed’s rate influence borrowing costs across the economy, including mortgage rates.
When the Fed lowers rates, it typically reduces the cost for banks and lenders to borrow money. In turn, mortgage lenders can often offer lower interest rates to homebuyers. Even small changes can make a big difference in affordability.
How Lower Rates Increase Buying Power
Here’s a simple rule of thumb: for every 1% drop in mortgage rates, a buyer’s purchasing power increases by about 9%.
That means if mortgage rates come down by even a quarter of a percent, buyers gain roughly 2–3% more purchasing power.
Let’s put that into perspective:
- At yesterday’s rate, a buyer could afford a $600,000 home with a certain monthly payment.
- After the cut, that same monthly payment could now afford a home closer to $615,000.
It’s the same budget, but suddenly more house is within reach, whether that means an extra bedroom, a better location, or just peace of mind that your payment is more manageable.
What This Means for Buyers
If you’ve been waiting on the sidelines, this could be your moment. Lower rates mean you can afford more home with the same monthly payment. And with inventory slowly increasing in many New Jersey towns, you may find more options to choose from than in past years.
What This Means for Sellers
For sellers, rate cuts often bring more buyers back into the market. More buyers = more competition, which can lead to faster sales and stronger offers. If you’re considering selling, now is the time to strategically position your home to capitalize on the renewed demand.
The Bottom Line
A quarter-point may not sound like much, but in real estate, it can open doors, literally. Whether you’re buying your first home, upgrading, or selling, this shift in mortgage rates is worth paying attention to.
I’d be happy to walk you through what this means for your specific situation. Let’s explore your options and see how today’s market can work in your favor.
Office: 908-664-1500 x564
Cell/Text: 908-917-4189
wayne.zuhl@gmail.com