Fed cut rates, What happened?

Didier Malagies • September 23, 2024

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When the Federal Reserve (Fed) cuts interest rates, it is usually intended to stimulate economic activity. Here's what typically happens when the Fed lowers its benchmark interest rate:


1. Lower Borrowing Costs

For Consumers: Lower rates make borrowing cheaper for consumers, particularly for loans such as mortgages, car loans, and credit cards. This often leads to increased spending and investment by consumers, which can boost economic growth.

For Businesses: Companies can borrow at lower rates to invest in new projects, hire more workers, and expand operations. Lower borrowing costs can encourage business growth and investment.

2. Increased Consumer Spending

Lower interest rates reduce the cost of borrowing, encouraging consumers to finance purchases, especially of big-ticket items like homes and cars. This increased demand for goods and services can help boost the economy.


3. Encouraging Investments

Stock Market: Lower interest rates can make stocks more attractive compared to bonds or savings, as the yield on safer assets decreases. This can push stock prices higher, as investors seek higher returns from equities.

Business Investment: Lower borrowing costs can prompt businesses to expand by purchasing new equipment, hiring more employees, or pursuing new ventures, which in turn stimulates economic activity.

4. Weaker Currency

Lower interest rates can weaken the U.S. dollar in international markets because investors may seek higher returns in other currencies. A weaker dollar makes U.S. exports more competitive abroad, which can help boost domestic manufacturing and the economy.


5. Stimulates Inflation

When borrowing becomes cheaper, demand for goods and services can increase, leading to higher prices. The Fed typically lowers rates when inflation is low or economic growth is sluggish. If demand rises faster than supply, inflation may increase, which is one goal if the economy is too slow.


6. Lower Savings Returns

Savings accounts, certificates of deposit (CDs), and other fixed-income investments typically yield lower returns when rates are cut. This can push savers to spend more or invest in higher-risk assets like stocks to achieve better returns.


7. Boost the Housing Market

Lower interest rates make mortgages cheaper, potentially driving up home sales and home prices as more people can afford to buy homes.


8. Employment Growth

Lower borrowing costs for businesses may lead to more hiring, as companies can finance expansions or projects at a cheaper rate. This can reduce unemployment rates and increase overall wages over time.


9. Risk of Overheating

If the Fed cuts rates too aggressively, it could lead to excessive borrowing and spending, which might cause inflation to rise too quickly, creating the risk of an overheated economy.


Why the Fed Cuts Rates

The Fed typically lowers interest rates during periods of economic slowdown, recession, or low inflation to encourage economic activity. Conversely, it raises rates when inflation becomes a concern or when the economy is growing too quickly.


In summary, a Fed rate cut is meant to stimulate the economy by making borrowing cheaper, encouraging consumer and business spending, and promoting investment. However, it can also carry risks, such as inflation and asset bubbles.



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What happens when the Feds drop the rates

By Didier Malagies • July 14, 2025
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Why mortgage purchase apps are on a 22-week growth streak

By Didier Malagies • July 8, 2025
Mortgage purchase applications are on a 22-week growth streak primarily due to a combination of improving market conditions, seasonal trends, and changing consumer behavior. Here's a breakdown of the key reasons behind the sustained growth: 🔑 1. Falling Mortgage Rates Mortgage rates have been gradually declining from the highs seen in 2023. Even small drops in interest rates significantly improve affordability, prompting more buyers to apply for loans. Borrowers are locking in rates with the hope that they’ve hit a local low. 🏡 2. Pent-Up Demand from 2023 Many potential buyers delayed purchases during 2023 due to high rates and limited inventory. As conditions improve, backlogged demand is being released into the market. 🌞 3. Spring & Summer Buying Season The U.S. housing market typically sees a seasonal increase in purchase activity starting in spring and continuing through summer. Families prefer to move during school breaks, contributing to more applications in this window. 💼 4. Improved Inventory Levels While still tight, housing inventory has started to improve slightly in some regions. Builders are offering incentives and new constructions are increasing, drawing more buyers into the market. 📈 5. Confidence in the Economy A strong labor market and steady wage growth are boosting consumer confidence , encouraging people to buy homes. Some buyers are moving before potential rate hikes or home price increases . 💡 6. Shift Toward Homeownership Rising rents and lifestyle changes post-pandemic are pushing many toward owning rather than renting . First-time homebuyers are a large portion of this demand. Summary:  The 22-week growth streak in mortgage purchase applications is being driven by lower mortgage rates, seasonal buying trends, improved inventory, and returning buyer confidence . While challenges like affordability and supply remain, these positive signals suggest a slow but steady rebound in the housing market .

What about all the disclosures I get during the loan process

By Didier Malagies • July 7, 2025
During the mortgage process, several disclosure documents are provided to help you understand the terms of the loan, your rights, and the costs involved. These disclosures are required by law and are designed to promote transparency and protect you as a borrower. Here’s a breakdown of the key disclosures you'll receive: 1. Loan Estimate (LE) When: Within 3 business days of submitting a loan application. Purpose: Provides a summary of the loan terms, estimated interest rate, monthly payment, closing costs, and other fees. Key sections: Loan terms (rate, type, prepayment penalty, balloon payment) Projected payments (principal, interest, taxes, insurance) Costs at closing (origination charges, services you can/cannot shop for) Why it matters: Lets you compare offers from multiple lenders. 2. Closing Disclosure (CD) When: At least 3 business days before closing. Purpose: Provides final details of the mortgage loan, including actual costs. Key sections: Final loan terms (rate, payments, closing costs) Cash to close (how much you need to bring to closing) A detailed breakdown of costs and payments over time Why it matters: Helps you confirm everything is accurate before you close. 3. Mortgage Servicing Disclosure Statement When: Within 3 business days of application. Purpose: Explains whether your loan might be sold or transferred to another company for servicing. Why it matters: Tells you who will manage your payments and account. 4. Affiliated Business Arrangement (AfBA) Disclosure When: At the time of referral to an affiliated business (e.g., title company). Purpose: Discloses any relationships between the lender and other service providers and explains you’re not required to use them. Why it matters: Ensures you know if there’s a potential conflict of interest. 5. Home Loan Toolkit (for purchase loans) When: Within 3 business days of application. Purpose: A consumer-friendly booklet from the CFPB that explains the mortgage process, costs, and how to shop for a loan. Why it matters: Helps first-time buyers understand the steps and choices. 6. Right to Receive a Copy of Appraisal When: Within 3 business days of application. Purpose: Notifies you that you can get a copy of the appraisal at no additional cost. Why it matters: Gives you insight into the value of the home you’re buying or refinancing. 7. Initial Escrow Disclosure When: At or within 45 days of closing. Purpose: Details amounts to be collected in escrow for taxes and insurance. Why it matters: Shows how your monthly mortgage payment is allocated. 8. Notice of Right to Rescind (for refinances only) When: At closing (for primary residence refinances). Purpose: Gives you 3 business days to cancel the refinance loan. Why it matters: Protects you from making a rushed decision. tune in and learn at https://www.ddamortgage.com/blog Didier Malagies nmls#212566 dda mortgage nmls#324329
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