Lower interest rates from Federal Reserve leads to debt payoffs
MISSION, Kan. (KCTV) - The Federal Reserve’s interest rate cut translates to paying off your debt quicker and more buying power, if you’re looking to purchase a new home or refinance a big purchase of any kind.
It sounds nice after inflation-fueled prices. The half-percentage point cut is the first one in more than a year.
This might be good news if you’re looking for a home or a brand-new car.
KCTV asked local relators how this could affect a housing market that’s been on fire and who it could benefit if they keep paying off debt in other areas at faster rates in higher amounts.
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It took more than a year for Victoria Friend to find a new house for her family. Partially due to debt in their name leading to higher interest on mortgage rates.
“We’re trying to get rid of as much of the debt as much as we could,” Friend said. “Pay off the cars and any of the credit cards left over. So, we were constantly working on getting all of that down, so it was gone.”
A half percent drop in interest by the Federal Reserve is not directly linked to lowering mortgage rates on their own.
However, it can mean lower rates on personal loans and credit card debt, strengthening your credit score. This can go a long way in lowering future mortgage rates.
“The slightest adjustment in interest rate can mean the difference of $50-$150 a month in a monthly payment,” Realtor Brian Polodna of Reece Nichols Real Estate explained.
Will Foster, the senior loan officer of First State Bank, shared more benefits.
“Taking advantage of balance transfer offers to try to reduce payments and interest they pay on credit cards,” Foster added. “They could look at potentially refinancing an automobile to lower their monthly payments and lower how much they pay on interest.”
As a consumer, this news has inspired Victoria Friend to allocate more money to get her family debt-free.
“It’s very motivating so the lower the rates, the faster you can pay it off,” Friend said. “So as long as you play your cards right and roll everything into it.”
Even if you already bought your house, Polonda says you can also get in a position to refinance once you strengthen your credit score paying off more debt.
“I’d encourage people to talk to their lenders because they may have enrolled in a program that allowed them to have a reduced fee if they go to refinance in a certain timeframe,” Polonda stated.
That timeframe for refinancing without extra fees could be two years after you bought your home or even longer.
Going forward, real estate agents say Kansas Citians need to be prepared for the housing market to get more competitive. This allows more people to inch closer to being debt-free and pursue their dream home, once mortgage rates become more affordable.
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