2 days Ago By Patrick Blennerhassett
The Federal Reserve is expected to cut borrowing costs Wednesday by either a quarter point or half percentage point, the first movement since 2020 when rates were set at a 23-year high of 5.25 to 5.5 percent.
The question is, what does this mean for the average Las Vegas resident? Matt Hennessy, a Las Vegas-based mortgage advisor, said now is a good time for people to start looking at their finances more closely, most notably big monthly financial obligations such as mortgages, car loans, credit cards and lines of credit. He said some interest rates will fall automatically Wednesday, such as credit card interest rates, so residents should see minor relief automatically. U.
S. credit card debt recently hit $1.1 trillion, its highest level in history and Hennessy said the start of cuts is a good sign for those struggling to make monthly payments.
Rate cut is welcomed “Lowering the fed funds rate is likely to be welcomed by consumers who have significant high interest credit card debt. For example, if a consumer had a $10,000 balance on a credit card with an average 25 percent annual percentage rate, they would be spending approximately $2,500 on interest per year, “he said. “Now if the annual percentage rate was to drop a few more times and that APR was reduced to let’s say 24 percent that would equate to $100 savings per month.
Overall, this is a not a huge savings for consumers but as we know every little bit helps.” Policy analysts believe the central bank will administer multiple cuts, hoping to settle somewhere in the 3 percent range over the next few years barring an economic downturn. Hennessy said waiting until the full cycle of expected cuts could bring about a bigger savings windfall, however he said anyone looking to save money right now should be looking into what loans they can renegotiate.
The U.S. economy is expected to receive a jolt from this first ceremonial cut, but analysts are unsure if rate cuts may expose a weak economy in hiding and actually drive inflation back up.
Mortgage rates could drop While mortgage rates are not directly set by the federal funds rate, Hennessy said they do tend to go in lockstep and they should start to drop as more rate cuts come through. He said refinancing should be considered for anyone who has taken out a mortgage in the past few years after rates shot up to stem inflation coming out of the pandemic. Jonathan Catalano, a real estate agent with ERA Brokers Consolidated in Las Vegas, said they have yet to see the translation of mortgage rates dropping close to a percentage point and expected rate cuts to more people looking to buy homes in the valley.
He also pointed to a potential wait and see approach regarding the outcome of the presidential election on Nov. 5. “Even with the lower rates, buyers however, haven’t seemed to react.
In fact, the market has become surprisingly sluggish in the last month or two with inventory at all price points struggling to get showings causing a high number of price reductions as seller push to get their homes sold,” he said. Las Vegas real estate prices continue to rise, coming close to an all-time high set in May 2022 , however Las Vegas still leads the country in terms of new listings. Catalano said only time will tell where a new rate cut cycle takes the American housing market, which many believe is overheated.
“We’ll have to wait and see how buyers react if rates dip into the fives but for right now, I think buyers have hit the brake pedals because of their uncertainty in the economy, particularly with the upcoming election,” he said. “History shows us that elections typically do not have much of an impact on housing activity but I think in this election cycle, the election results will be more of a driving factor for buyers to get off of the sidelines than lower interest rates will.”.
