Frank Gageby Blog

The Federal Reserve cut interest rates today that could effect mortgages in a number of ways.  There were two significant rates effected by today's interest rate cuts.  The Discount Rate, which the Fed lowered by .50 for the second time in a month.  More importantly, the Federal Reserve lowered the Federal Funds Rate by .50 to 4.75%.  The latter is the biggie!

The Federal Funds move was the first reduction in four years.  This should cause a corresponding lowering of the Prime Rate charged by member banks across the country.  This will spur reductions in Home Equity Loans, Credit Cards interest rates, and some Adjustable Rate Mortgages. 

Fixed rate mortgages may also see a modest reduction in addition to the reductions we have seen in the last few weeks in anticipation of the Fed ease. 

In my view, the most important aspect brought about by today's Fed move is the positive psychology for the marketplace.  The moves add much needed liquidity which should boost investor confidence in the credit markets.  This new mind set could help ease credit guidelines, add programs, and lower interest rates going forward.