The Federal Reserve cut its key interest rate on Wednesday. Is now the time for eager homebuyers to take out a mortgage? Not necessarily, Northeastern economist Bob Triest says. “The cut yesterday will have essentially no effect,” says Triest, professor of economics at Northeastern. “But in combination with cuts to come, the anticipation of which will have an effect on the bond market, and will likely result in mortgage interest rates dropping.”
The Federal Reserve cut the Federal Funds Rate by a quarter-point on Wednesday, lowering the short-term rate to about 4.1%, down from 4.3%. It was the first change to interest rates in nine months, as the Fed weighed the impact of tariffs, budget policies and tighter immigration enforcement on inflation and the economy. President Donald Trump has called for the Fed to cut rates dramatically to encourage home buying. “People aren’t able to buy a house,” Trump said in the Oval Office in July, referring to the Federal Reserve and the reluctance of Fed Chair Jerome Powell to lower the key interest rate. But the Federal Funds Rate — which is the rate that banks use to lend each other money overnight — is not directly tied to mortgage rates, Triest noted, so mortgage rates will not likely come down immediately.
