In a highly anticipated move, the Federal Reserve moved on September 17th to lower the federal funds rate by 25 basis points and signal that risks to the employment market have increased. At the same time, they are still concerned about the inflationary aspects of the Trump administration’s tariff policy. While they believe that any increase in inflation would be a temporary, one-time hit, they remain on guard. They also released their dot plot, which showed where voting members believe rates will be over the next year. The consensus was that there would be two more cuts between now and year-end, but there were still several members that believed there would be no cuts at all. The rate that they cut is the overnight lending rate between banks. It impacts the prime rate which determines rates for things such as home equity lines of credit, car loans, etc…. Mortgage rates on the other hand, are determined by the mortgage-backed securities market which operates independently of anything the Fed does. Consequently, in anticipation of the Fed cutting rates in mid-September, the MBS market started to improve back in late July and actually dropped about 1/2% between then and when they ultimately lowered rates on September 17th. Unfortunately, the market was hoping for a bigger interest rate cut and therefore sold off on the heels of that announcement. Rates are slightly worse than they were at the bottom, the day before the meeting. As we look back down memory lane, virtually the same thing happened a year ago. September 2024 was the first rate cut of this cycle. It was highly anticipated and therefore rates slid dramatically leading up to that September meeting only to get dramatically worse over the next two months. The reaction this time around has been relatively muted, and we do not anticipate that there will be any kind of dramatic increase. If you are in or close to the sweet spot for refinancing, John Becker has reached out to you. The opportunities to grab a good rate come very quickly, so get with him if he reaches out to take advantage! Waiting on the Fed to continue to lower interest rates is likely a losing proposition. Last year they lowered the Fed Funds rate 1 1/2% between September and December and long-term mortgage rates increased during that timeframe 1%. The market always acts in anticipation of what they believe the Fed will do in the future and their perception of where employment and inflation data will fall.
Tips on Shopping for Insurance
Recently, my insurance came up for renewal and as we always recommend, it can save you big bucks if you shop around. It’s always amazed me how in just one short year companies can be so different in their quotes depending on their appetite and loss ratios. We recommend checking with one independent agent and then another couple of quotes from some of the big boys like Liberty Mutual, Allstate, State Farm, etc. When I solicited quotes, I had one independent agent come back with an estimate from Allstate which was the best he was able to offer. I happened to know an Allstate agent, so I went back to them to verify the quote. Much to my surprise there were some decent differences. The largest discrepancy had to do with the dwelling protection coverage amount. In other words, if you have to rebuild from the ground up, how much would it cost? These companies have calculators that automatically compile this based on the input from the agent. Much of this is from public records and can be incorrect. Always ask for a copy of the replacement cost estimator so you can verify for yourself that the input is correct. Yes, most insurance is replacement cost but what most people miss is that the dwelling coverage is typically the maximum amount they will cover. Hence, this is extremely important to review. You can buy guaranteed replacement coverage, but it comes at a cost. There should be no need to do this if you’re comfortable with the amount offered by the insurance company. The other thing that shocked me was the auto insurance was $600 per year cheaper between the Allstate agent and the independent agent that was also quoting Allstate. Make sure that the agent you are dealing with has good experience because that makes a difference as well. Happy Shopping…hope this helps!
