Get ready to refi: The Fed announces its first rate cut in 10 years

The Federal Reserve's latest decision may be great news for homeowners. On Wednesday, July 31, 2019, the Federal Reserve cut interest rates for the first time in more than a decade. In the past three years, the Fed has increased the federal funds rate nine times. Now, the Fed has decided to reduce interest rates by 25 basis points for the first time since 2008.

The Fed cuts rates, and homeowners shouldn't wait

Due in part to the Fed's decision not to raise rates at its last early 2019 meeting, mortgage rates have continued to drop. Many homebuyers have leveraged these historically low rates to lock in a lower monthly payment. Currently, the average 30-year fixed mortgage rate rests at 3.75 percent.

Homeowners also have the unique chance to reduce their monthly payment by refinancing at today's lower rate. Following the Fed's first rate cut since the recession, refinancing homeowners may have the greatest money-saving opportunity of all.

One of the biggest reasons to refinance is because the recent Federal Reserve decision can make borrowing somewhat cheaper.

Factoring in that benefit, refinancing can be used to lower your interest rate and your monthly payment. This is by far the most popular reason homeowners refinance: Dropping a 5 percent interest rate to today's mortgage rate that sits below 4 percent can decrease your monthly mortgage payment and overall loan cost.

Refinancing can also be used to shorten your loan term at the same time. Potentially reducing a 30-year loan term to a 15-year loan term can help you pay off your mortgage sooner. Or, because of continually increasing home values, you could have accumulated enough equity to cash out on. Many homeowners are finding they've built ample equity to fund education, debt payoff, a wedding or vacation, or home renovations within a few short years.

If your current home doesn't meet your present needs, refinancing right now might not be in your interest. Instead, you can consider taking advantage of the latest Fed rate cut to trade in your home and move up into the next price bracket. Purchasing a new home at a lower interest rate than what you have on your current home — adding in your growth in equity — is likely to give you the leg-up you need to buy bigger or in a better place.