Fed cut rates, What happened?

Didier Malagies • September 23, 2024

Followi


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.



tune in and learn at https://www.ddamortgage.com/blog


didier malagies nmls#212566

dda mortgage nmls#324329


Ask a Mortgage Question

Use the form below and we will give your our expert answers!

203H Ask A Question

Start Your Loan with DDA today

Your local Mortgage Broker

Mortgage Broker Largo
See our Reviews

Looking for more details? Listen to our extended podcast! 

Check out our other helpful videos to learn more about credit and residential mortgages.

Should I lock in my interest rate with Tariffs and the environment we are in now

By Didier Malagies • May 26, 2025
Locking in your interest rate can be a smart move under the right circumstances—especially when there's economic uncertainty, like tariffs, geopolitical tension, or volatile inflation. Here are a few key considerations to help you decide: ✅ Reasons to Lock in Now: Rising Rate Environment: If inflation is persistent and the Fed continues to signal rate hikes (or holding rates higher for longer), mortgage and loan rates might increase. Market Volatility: Tariffs and global economic uncertainty can lead to unpredictable swings in rates. Locking in now protects you from upward movement. You’re Close to Closing: If you're within 30-60 days of needing the loan (e.g., buying a house), rate locks are usually worth it. Peace of Mind: Locking gives you certainty in an uncertain time, helping you budget better and avoid surprises. ❌ Reasons to Hold Off: You Expect Rates to Drop: If there's strong indication that rates will fall due to recession fears or easing inflation, waiting could save money. You're Not Ready to Act: If your closing is still months away or you're just shopping around, locking too early may be premature (and rate locks often have time limits and fees) tune in and learn more at https://www.ddamortgage.com/blog didier malagies nmls#212566 dda mortgage nmls#324329

American are living longer - but they aren't prepared for retirement impacts

By Didier Malagies • May 19, 2025
Recent research from the Nationwide Retirement Institute and The American College of Financial Services highlights a significant disconnect between Americans' increasing life expectancy and their financial preparedness for retirement. As more individuals are living into their 90s and beyond, many are at risk of outliving their savings due to inadequate planning. Key Findings Longevity Risk : The U.S. Census Bureau projects that the number of Americans living to 100 will quadruple by 2054. However, only 29% of Americans express a desire to live that long, primarily due to concerns about declining health and financial insecurity. Underestimating Lifespan : A significant portion of Americans underestimate their potential lifespan. Only 27% could accurately estimate the average longevity of a 65-year-old, leading to insufficient retirement planning. Financial Literacy Gaps : The Retirement Income Literacy Study reveals that many older Americans lack knowledge in key areas such as Social Security, investments, and longevity planning, which are crucial for retirement readiness. Delayed Retirement : Economic uncertainties, including inflation and market volatility, have led 76% of surveyed individuals to consider delaying retirement to ensure financial stability. Business Recommendation To address these challenges, experts suggest: Longevity Planning : Incorporate realistic life expectancy estimates into retirement planning to ensure savings last throughout one's lifetime. Financial Education : Enhance understanding of retirement-related financial topics, including Social Security benefits and investment strategies. Guaranteed Income Streams : Consider products like annuities that provide a steady income to mitigate the risk of outliving savings. Professional Guidance : Work with financial advisors to develop comprehensive retirement plans tailored to individual needs and longevity expectations. Also look and see what a Reverse Mortgage can help with as well Didier Malagies nmls212566 DDA Mortgage nmls324329

Where do I do Mortgages?

By Didier Malagies • May 19, 2025
I do Residential Mortgages in the State of Florida only, that is where I am licensed. Most of my business is from Pinellas, Hillsborough, and Pasco County. I am doing more loans all over the State as time goes on. I love to go to my closings and will drive up to 1 hour to be there at your closing. I do Fnma/FHMC, FHA, VA, C/p, Nonqm mortgages. On the Commercial side the whole Country is open and if you are having difficulty with your lender and not going anywhere, go to www.ddamortgage.com and complete a form and I will get back with you. Technology has made it so easy to help get your mortgage processed and closed I am always available to help out and I answer your questions and teach you along the way tune in and learn at https://www.ddamortgage.com/blog didier malagies nmls#212566 dda mortgage nmls#324329 
Show More