The Federal Reserve is expected to cut interest rates at its September policy meeting next week. However, lower rates don't mean you'll get a deal if you wait to take out a longer-term loan. Yale School of Management professor of finance Kelly Shue joins Wealth! to break down how your loans may be impacted by an interest rate cut.

"What my research shows is that it is a mistake to wait until an expected Fed rate cut to actually go and take out a long-term loan. And the reason is the interest rate on any long-term loan is forward-looking," Shue explains. She notes that interest rates on long-term loans, like mortgages, have already factored in market expectations for the Fed's interest rate-cutting cycle. Unless the Fed cuts interest rates more than the market expects, long-term loans will likely remain unchanged after the September meeting.

She adds, "In some ways, I think the rational, correct way for consumers to behave is actually not to worry about timing interest rate markets and that is because the current interest rate in the market for any long-term loan already reflects all the information we have about what the Fed is likely to do in the future." Therefore, she explains, there is no reason for homebuyers to rush to get a mortgage once the Fed initiates its first rate cut.

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This post was written by Melanie Riehl