Fed Rate Cut- What it means to YOU
Sep 21st, 2007 by Ginger Wilcox
As expected, the Fed lowered the Federal fund rate on Tuesday. It also cut the discount rate by 50 basis points - this was not expected. This move shot a healthy dose of confidence in Wall Street causing stock prices to soar. So what does it mean to the mortgage market?
On the longer-term mortgages, the answer is likely to be “not much.” The Federal Reserve announced on Tuesday that it would cut the Federal funds rate from 5.25% to 4.75%. It also cut the discount rate, the rate that the Federal Reserve makes direct loans to banks, from 5.75% to 5.25%.
The rate cuts should translate into lower rates for short-term loans or adjustable loans such as home equity lines of credit, credit cards, business loans, and car loans. For individuals shopping for a 30-year fixed loan, the mortgage rate typically moves in-line with the interest rate on the 10-year U.S. Treasury note.
