Real Estate Blog

The Fed announced yesterday a .5% rate cut to "short term" interest rates 

 

Here is what this all means:

 

~Fed cutting rates is a short term overnight bank to bank lending rate and does not have a direct impact on long term Mortgages.

 

~It will lower rates on Home equity line and credit cards

 

~It COULD move mortgage rates lower but they could also go up higher on the news. If the stock market rallies this week on this news, it could cause long term rates (mortgages) to increase.

 

~What is missed on the headlines as it pertains to mortgage rate is the FED is starting another round of Quantitative Easing (QE). QE is when the FED infuses (PRINTS) cash/money into the economy in the form of purchasing assets.  In this case Treasury and Mortgage bonds. The degree to which QE is used to purchase Mortgage Bonds (Mortgage Backed Securities will determine if and by how much rates will come down.)