How Does 3/4% Fed Rate Cut affect Real Estate?

In a surprise move, the Federal Reserve cut its federal funds rate by 3/4% from 4.25% to 3.5%. This rate impacts credit card, home equity line of credit, and auto loan rates.

What about mortgage rates? Mortgage rates are tied to long-term bond yields. Those rates today (12:00 p.m. EST) went down only .01% for 30 year bonds, .07% for 1o year bonds, and .21% for two year bonds. We can see that the shorter the term, the more of drop. Long-term rates are barely affected.

The rate cut will help those with Adjustable Rate Mortgages (ARMs) that have not yet adjusted. Find out what rate your ARM is tied to and you’ll get an idea how your rate will be affected. The move today may result in a drop of .25% because the bond markets were anticipating a .5% drop. Another rate drop is expected after the Federal Open Market Committee (FOMC) meeting ends on January 30th.

Since mortgage rates are tied to long-term bonds, we need to watch what happens over the next few days and weeks. If you are in the process of securing a mortgage and have not yet locked the rate, you may want to watch the rates carefully to see how this move plays out.

Overall, we believe the rate cut can have positive effects on the real estate market in Daytona Beach and throughout the country. The rate cuts are an emergency move to stimulate the economy and that’s not bad.

Technorati Tags home loans, mortgage, mortgage rates, real estate, Real Estate Market conditions

Related posts:

1. Mortgage Rates Tumble After Fannie and Freddie Bailout - What to Do
2. Inflation Up 0.8% in July - What’s the Affect on Mortgage Rates?
3. How Does New Housing Bill Affect Daytona Beach Real Estate Market?
4. Mortgage Rate Increases Headline Daytona Beach Real Estate News
5. Mortgage Rate Increase Alert for Home Buyers