Will the Fed’s jumbo rate cut be the boost homebuyers have been waiting for?

Potential homebuyers have long been waiting for the Federal Reserve to lower interest rates, hoping to lead to more affordable mortgage options. Last week, they may have seen their opportunity, as the Federal Reserve announced a larger-than-expected rate cut of 50 basis points (0.5%), marking the first reduction since 2020. This "jumbo cut" addresses slowing inflation and economic uncertainty, likely resulting in lower mortgage rates in the short term.

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But is this cut enough to lure potential buyers back into the housing market? Point surveyed 1,000 individuals to gauge how this shift might influence their buying decisions over the next 12 months. Will lower rates be the tipping point, or are broader economic concerns still keeping buyers on the sidelines?

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Key Findings:

• Homebuying interest remains strong: Forty-four percent of survey respondents are considering buying a home within the next year. However, the timing of their purchase will heavily depend on further interest rate cuts.
• Rate sensitivity is high: Over 75% of those surveyed indicated that they are waiting for mortgage rates to dip below 5.9% before making a move, whether buying, selling, or refinancing. Although this is still a high threshold, it marks a slight shift from August, when 90% of respondents held out for sub-5.9% rates. This softening of expectations suggests that some potential buyers may move more quickly as rates approach their ideal target.
• Breaking down the rate preferences:
  • 27% of respondents are holding out for rates between 5% and 5.9%.
  • 23% are aiming for rates between 4% and 4.9%.
  • 17% are waiting for rates between 3% and 3.9%.
• Affordability concerns remain top of mind: Rising monthly payments, whether for new home purchases or refinancing, continue to be the most significant deterrent for prospective buyers. Affordability remains a major concern, with many waiting for further rate reductions to lessen the financial burden.
• Patience on refinancing: While lower rates might be sparking hope for homebuyers, they haven’t done enough to push homeowners to refinance. A mere 9% of respondents expressed interest in refinancing their current mortgages. Among those considering it, nearly 72% want rates to dip below 5% before making a move.

The road ahead for buyers

“The financial markets weren’t the only ones encouraged by September’s interest rate cut by the Fed,” said Eddie Lim, CEO of Point. “While potential home buyers seem hopeful that more cuts are on the horizon, they’re not ready to jump back in with both feet. They’re still worried about affordability and waiting for more rate cuts.”

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As the housing market continues to react to shifting economic policies, it’s clear that many homebuyers remain cautious. For most, the promise of more favorable rates in the near future may be just what they need to make their next move.

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