President Donald Trump’s request to cut current interest rates by 1% to promote the growth of the US economy has been overlooked it seems as the Federal Reserve announces that rates will remain steady for now.
Current Interest Rates and the Fed’s Decision
Interest rates currently sit at a range between 2.25 and 2.5% and will remain at this level for the time being. This is the third time in 2019 that the Fed has made the call to keep interest rates the same.
Keep in mind that these are the borrowing costs between mortgage lenders, financial institutions, and the like- it’s the rate they are charged when they lend to one another. According to the Federal Reserve, current interest rates don’t directly affect mortgage costs for property buyers.
The Fed had this to say about its decision to remain “patient” and not reduce interest rates:
“Job gains have been solid, on average, in recent months, and the unemployment rate has remained low. Growth of household spending and business fixed investment slowed in the first quarter. On a 12-month basis, overall inflation and inflation for items other than food and energy have declined and are running below 2 percent. On balance, market-based measures of inflation compensation have remained low in recent months, and survey-based measures of longer-term inflation expectations are little changed.”
Current rates are historically low and the last time such a significant reduction was implemented was during the last US financial crisis in December of 2008. And according to the above statement from the Fed Reserve, the US economy is far from that state and is in no need of a drastic change in the current interest rates. However, the 2019 economic forecast does show that there will be a slowdown this year compared to 2018 and even though at the end of last year, the Federal Reserve had plans to raise interest rates a few times throughout the year, it seems those plans have drastically changed.
How This Affects Real Estate Investors
It is generally accepted among economists that interest rates don’t directly impact borrowing costs and mortgage rates. In fact, 2019 is forecast to be a great year for investors and property buyers who will enjoy an average of 4.3% for the 30-year fixed mortgage rate. This is actually 0.3% lower than the average in 2018.
Still, current interest rates and how the Fed changes them are an important indicator that real estate investors need to keep their eye on. For one, it’s clear interest rate changes are directly tied to the state and health of the economy. And every real estate investor knows that the health of the economy and the real estate market are closely tied together. So, be sure to watch the moves of the Federal Reserve over the course of 2019 and beyond to keep up with important investment trends.
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