The Fed makes a big money decision this week. Here's what it means for your home, your wallet and your plan, in plain English.
First, what is "the Fed"?
The Federal Reserve, or "the Fed," is like the referee for money in our country. A few times a year, they decide if borrowing money should cost more or less.
They are meeting today and tomorrow. They will share their decision tomorrow, Wednesday, at 11 AM our time (2 PM on the East Coast).
What's happening right now
- Mortgage rates are calm. They have stayed close to their lowest point in about a month (Mortgage News Daily).
- Most experts think the Fed will wait this time. That means no change tomorrow (Continuum Economics).
- But they may raise costs later. Many experts think the next move could be up, maybe in December.
- Everyday costs are still high. Gas in California is still over $6 a gallon (Energy Factbook, citing AAA). Credit cards still charge a lot of interest (Bankrate).
I don't try to guess what the Fed will do. You shouldn't have to either. A good plan works no matter what they decide.
What the Fed changes (and what it doesn't)
Think of your debts in two groups.
These can change when the Fed moves:
- Credit cards
- Home equity lines of credit (HELOCs)
- Adjustable-rate loans
This stays the same:
- A fixed-rate mortgage you already have. Your rate is locked. The Fed can't touch it.
So if you have a fixed mortgage, you can relax about that part. The debts to watch are the ones in the first group.
Your low mortgage rate is a treasure
If you bought or refinanced a few years ago, your rate may be lower than what people can get today. That is a big deal. Keep it safe.
What if you need money for a new roof, a kitchen, a pool, or to pay off cards? You may not need to give up your low rate. A HELOC lets you borrow against your home's value while keeping your first mortgage just the way it is. It is a lot like a credit card that uses your home as backup, but usually at a lower cost.
It isn't right for everyone. The smart move is to compare your choices side by side before you decide.
What's happening in our area
Homes in Riverside County are selling more slowly than last year. Prices have stayed about flat (California Association of Realtors).
- If you're buying: You may have more room to ask for help, like the seller paying some of your costs.
- If you tried to sell and it didn't work: It may be smart to stay and fix up your home instead. A project can make your home fit your life better, and you keep your low rate.
Looking for a great local agent? Meet the trusted realtors we work with on our Meet Our Partners page. We can help you find someone who knows your neighborhood.
5 simple things you can do this week
- Don't panic about the news. One day of headlines shouldn't change your whole plan.
- Make a list of what you owe. Write down each debt and its interest rate.
- Circle the debts that can change. Credit cards and HELOCs come first.
- Protect your low mortgage rate. Look for options that keep it.
- Make a payoff plan. If you combine debts, write down how and when you'll pay them off, so the cards stay at zero.
Quick questions
Should I wait for rates to go down before I do anything? Nobody knows for sure where rates will go. Right now, experts think they are more likely to stay the same or go up than to go down. It's usually better to plan for today and adjust later.
Is a HELOC better than a cash-out refinance? It depends. A HELOC keeps your current mortgage. A cash-out refinance replaces it with a new one. Compare the total cost of both before you choose.
How often should I check my home's value and equity? Once a year is great. Also check whenever life changes, like a new baby, a new job or a big project.
Going deeper: for realtors, advisors and investors
- Why mortgage rates are calm: Mortgage rates tend to follow the 10-year Treasury yield, which has drifted lower this month (Mortgage News Daily). Wednesday's decision matters less than the Fed's tone. A signal of more hikes could push longer-term rates up even if they hold.
- The data that comes next: Thursday brings the first read on Q3 GDP and September PCE, the Fed's favorite inflation measure (Kiplinger). A hot inflation number tends to matter more for mortgage pricing than a hold.
- Equity, not refinance, is the story: Most homeowners have a low first mortgage they don't want to give up. That is why second liens (HELOCs and home equity loans) have been most of the equity borrowing nationwide (HousingWire). HELOC pricing usually moves with the prime rate, so a December hike would raise HELOC costs quickly. Clients with open HELOC balances should know that.
- Local market: Riverside County sales were down notably from a year ago in September, with the median price about flat (C.A.R.). That favors seller credits over price cuts for buyers who are close, and "stay and improve" equity reviews for expired or withdrawn listings.
- Talking point for your clients: "The Fed is expected to hold, but the bigger question is whether they signal another hike. If you're close to buying, lock in your plan, not your hopes. If you own, protect your low first mortgage and look hard at any balance that floats."
Let's look at your numbers together
Want a clear, no-pressure look at your home, your debts and your options? Book a free call with me, or start with the free 3-minute Financial Health Scorecard. You'll walk away with a plan you understand.
— Stephen
Stephen Chakerian, NMLS #2193331. Barrett Financial Group, L.L.C., NMLS #181106. Equal Housing Opportunity. For education only; not a commitment to lend.
