What The Feds Rate Cut Means For Homebuyers In Los Angeles

Recently Federal Reserve cut interest rates by a quarter of a point (or 25 basis points), the first cut since 2008’s so-called Great Recession. The Fed’s interest-rate cut came as the result of concerns over a slowing economy. It will be felt by many Americans, especially homebuyers, but maybe not in the ways and as drastically as some expect. In addition, since rates were already historically low, the cut leaves the Fed little maneuvering room in the case of a recession or other economic stumble. So let’s see what, exactly, the Fed’s rate cut means for homebuyers in Los Angeles.

Broad Implications of the Fed’s Rate Cut

In broad strokes, what the Fed’s rate cut means for homebuyers in Los Angeles is only a slightly more favorable borrowing environment. It may, however, prove to be more beneficial for homebuyers using other types of financing than the traditional 30-year fixed-rate mortgage. 

The Fed’s rate cut, according to experts, “is designed to stave off the threat of an economic downturn. But it’s unlikely to translate into additional mortgage savings for many buyers. With the interest rate for a 30-year loan already hovering below 4%, the Fed’s move may be more meaningful for buyers with other types of financing.” The reason for this is that 30-year fixed-rate mortgage rates “had already declined in anticipation of this latest move by the Fed.” But homebuyers with adjustable-rate mortgages will see more benefit.

Still, the Fed’s rate cut does mean that home buyers in [market-city] will have lower borrowing costs and will be better able to deal with rising home prices. Here’s an example: “buyers who spend $1,500 on monthly mortgage payments can afford to purchase a $402,500 home this year compared to $367,500 last year when mortgage rates averaged 4.57% . . . Last year, buyers would have needed an additional $145 a month on top of the $1,500 to afford a $402,500 home.” 

And it can give you even more purchasing power in areas and neighborhoods where home prices are rising steeply. Contact your local agent at 562-881-9811 to find out more about this.

What, Exactly, the Fed’s Rate Cut Means for Homebuyers in Los Angeles

There are three identifiable benefits the Fed’s rate cut will have for homebuyers in Los Angeles. These are:


As a home buyer, you have to have money set aside for the down payment and closing costs and money in reserve for unexpected expenses like repairs and rising property taxes. And you will need to save that money in order to have it. The Fed’s rate cut may help you do that.

Because the Fed’s rate cut is a small one and comes on the heels of several increases over the past decade, trying to save isn’t as futile as it was when the Fed slashed interest rates to near zero. At the end of 2015, for example, the average certificate of deposit was yielding an annual return of around 0.25%. But now it is closer to 1%.

Further, the Fed’s rate cut means homebuyers in Los Angeles should look into some of the reputable online savings accounts. Many of these pay yields of over 2% and some require only a very small minimum balance to open an account (VARO, for example). 

Anticipatory Mortgage Rates

Mortgage interest rates typically anticipate and then move in the expected direction of the Fed’s actions. The average interest rate for a 30-year mortgage was almost 5% not all that long ago but fell to just over 3%. “The slide was tied to expectations that the Fed was going to cut rates.” And it did indeed happen.

The expectation is that the Fed may cut rates again, Keep in mind, though, that mortgage interest rates will anticipate this and come down even before the Fed’s next move. So what the Fed’s rate cut means for homebuyers in Los Angeles is that very soon they may see the best interest rates for buying a home affordably. 


The Fed’s rate cut also means that home buyers in Los Angeles.

The Critical Time to Buy – Now and in the Near Future

So, all in all, the Fed’s rate cut means for homebuyers in Los Angeles . . . good news. The news may not be as resoundingly good as we would like, but things are still shaping up for home buyers, especially those interested in an adjustable-rate mortgage and particularly just ahead of the expected cut this fall. To find out if the time is right for you to buy a home, consult your local agent. 

Let us help you learn more about what the feds rate cut means for homebuyers in Los Angeles! Reach out to us today! 562-881-9811

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