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What 0% interest rates mean for mortgages, credit cards

Casey Van Winkle, owner of First Class Mortgage breaks down what this means for the average person.

When the Federal Reserve dropped interest rates to 0% — many started asking what that means for credit cards and mortgages?

Casey Van Winkle owns First Class Mortgage in the Twin Cities. He said in his 15-year career, he has never seen the market more volatile. Monday morning, he received a load of questions from clients wondering what it all means.

Van Winkle: It creates some confusion for people. When the Fed cut  the federal funds rate, it is actually cutting the consumer rate. It is more driven toward credit cards and it lowers auto loans. It lowers home equity lines of credit. It really doesn't impact like that 30-year fixed rate like people think. There is more of a long term correlation, not a short term correlation. 

Who does this interest rate benefit? 

It seems to be at a level where everybody benefits. The way I look at this, this is a way for an individual or a family to reduce their monthly mortgage payment. In most cases, the mortgage is their largest monthly payment, by anywhere from 10-15 percent reduction.  When you can lower your rate by one percent and get rid of mortgage insurance, it creates an incredible opportunity to save.  

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Let's say I lock and the rates go down, can I unlock? 

Every investor has different policies when it comes down to re-negotiating or floating down your rate. The strategy I am using is basically putting clients into floats so we are not locking the rate and submitting the file that way, and we will lock when it is the right time once the market has hit the lowest dip. That is something to ask when shopping around for a refinance. 

Who should buy a house right now? 

Anybody that is renting or has a dream of home ownership, it is much available. If you are renting and the rent is going up, now is a good time to get out there and search in a healthy way. You can buy a $300,000 house, for example, and have a payment that is more like you are buying a $260,000 property.  That is how much savings with how low interest rates have gotten.

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