On September 17, the Federal Reserve announced its first interest rate reduction of the year, lowering rates by a quarter point. To better understand how this change could affect both homeowners and potential buyers, we spoke with John Hummel, head of retail home lending at U.S. Bank.
How does this affect homeowners?
Over the past several years, rising property values have pushed home equity to record highs, and many homeowners have been tapping into that equity to cover major costs—such as renovations, tuition, or debt consolidation.
With the Fed’s rate cut bringing down the prime rate, borrowers who use home equity products may notice slightly more favorable borrowing conditions. For instance, home equity lines of credit (HELOCs) allow homeowners to access funds as needed at a variable rate, and existing or new borrowers could see their rates dip a little on new draws. On the other hand, those applying for a home equity loan—typically a lump-sum loan with a fixed rate—might also benefit from modestly lower interest rates.
What about buyers? Will mortgages get cheaper?
Interestingly, mortgage rates don’t directly follow the Fed’s prime rate. Instead, they are more closely tied to bond markets and the 10-year Treasury yield. Because investors often anticipate rate cuts, mortgage rates sometimes reflect those expectations in advance. As a result, when the Fed announces a cut, mortgage rates don’t always move immediately.
That said, earlier this month mortgage applications hit their highest level of the year. Even before the latest Fed move, some mortgage rates had already begun to ease, creating opportunities both for buyers actively making offers and for homeowners considering refinancing—particularly those with larger loans, where even a small dip in rates can make a noticeable difference.
Advice for buyers
If you’re preparing to purchase a home in the near future, the best first step is to connect with a knowledgeable mortgage loan officer. They can walk you through affordability, estimated monthly payments (including taxes and insurance), and special financing opportunities such as down payment assistance.
Across the U.S., there are nearly 2,500 down payment assistance programs available through state and local agencies, as well as certain lenders. For example, U.S. Bank offers specific programs in more than 30 states and several local markets.
Advice for homeowners
Now may be an opportune time to evaluate home equity options for upcoming financial needs. Consulting with a mortgage specialist can clarify how much you might be able to borrow against your equity.
For those nearing retirement, applying for a HELOC before leaving the workforce can be especially beneficial. Since approval factors in current income, applying while still employed may strengthen your application. At U.S. Bank, there’s no fee to apply, making it a potentially strategic step to take ahead of retirement.
How does this affect homeowners?
Over the past several years, rising property values have pushed home equity to record highs, and many homeowners have been tapping into that equity to cover major costs—such as renovations, tuition, or debt consolidation.
With the Fed’s rate cut bringing down the prime rate, borrowers who use home equity products may notice slightly more favorable borrowing conditions. For instance, home equity lines of credit (HELOCs) allow homeowners to access funds as needed at a variable rate, and existing or new borrowers could see their rates dip a little on new draws. On the other hand, those applying for a home equity loan—typically a lump-sum loan with a fixed rate—might also benefit from modestly lower interest rates.
What about buyers? Will mortgages get cheaper?
Interestingly, mortgage rates don’t directly follow the Fed’s prime rate. Instead, they are more closely tied to bond markets and the 10-year Treasury yield. Because investors often anticipate rate cuts, mortgage rates sometimes reflect those expectations in advance. As a result, when the Fed announces a cut, mortgage rates don’t always move immediately.
That said, earlier this month mortgage applications hit their highest level of the year. Even before the latest Fed move, some mortgage rates had already begun to ease, creating opportunities both for buyers actively making offers and for homeowners considering refinancing—particularly those with larger loans, where even a small dip in rates can make a noticeable difference.
Advice for buyers
If you’re preparing to purchase a home in the near future, the best first step is to connect with a knowledgeable mortgage loan officer. They can walk you through affordability, estimated monthly payments (including taxes and insurance), and special financing opportunities such as down payment assistance.
Across the U.S., there are nearly 2,500 down payment assistance programs available through state and local agencies, as well as certain lenders. For example, U.S. Bank offers specific programs in more than 30 states and several local markets.
Advice for homeowners
Now may be an opportune time to evaluate home equity options for upcoming financial needs. Consulting with a mortgage specialist can clarify how much you might be able to borrow against your equity.
For those nearing retirement, applying for a HELOC before leaving the workforce can be especially beneficial. Since approval factors in current income, applying while still employed may strengthen your application. At U.S. Bank, there’s no fee to apply, making it a potentially strategic step to take ahead of retirement.