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The Fed Funds Rate is Not the Interest Rate

Happy Wednesday – I hope you are doing well. This week I want to talk about fear in the market. I have spoken to several people that think when the Fed raises rates next week it will directly raise mortgage rates. That is not the case. The Fed Funds rate is the rate banks borrow money from each other and not the mortgage interest rate. As you can see in this article below, rates actually went down last week when the Fed said they may raise the Fed Funds rate by 1% instead of .75%.

Long story short, if you watch the news, it is hard to not be scared because they sell fear. I have been in the mortgage business 16 years and the last 2 years have been the most stressed my buyers have been due to low inventory. They had to make 4 – 12 offers to get a home, pay 10 -20% over list price, and have no contingencies and short close dates. The market has shifted in the last month and that is not the case now. My buyers are getting offers accepted below list price, getting seller concessions and getting reasonable contingencies and close dates. In my opinion, it is the better time to buy then it has been in the last 2 years.

So, if you are renting, if you need to move for more space, school district, safety or other reasons, then talk to a good realtor and lender and figure out your options. Having a good realtor is always important but is more important now than ever. If your realtor doesn’t realize the market has shifted, they might have you overpay for the property. Don’t get me wrong, there are still properties that are receiving multiple offers that are going above list with short contingencies, but that is becoming the exception and not the norm.

Lastly, we still have an inventory issue. If everyone waits for rates to come down to buy a home, we are going to have the same issues we had the last 2 years. Marry the Home and Date the Rate. Find the house you love now and when rates go down and everyone is competing for homes again, all you have to do is refinance.

Sorry to be so long winded today but I wanted to share my thoughts with you. Please call me if you would like to discuss in more detail.​ Stewart Sadler

Managing Partner

Cornerstone Mortgage Group

Georgia Residential Mortgage Licensee: 21412 • Company NMLS: 147913 • Individual NMLS: 147938

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