Emergency Fed Rate Cut

Emergency Fed Rate Cut
The Federal Open Market committee cut the minimum interest rates that banks can charge one another for making loans by 0.75 percent, driving rates down to 3.5 percent. The emergency rate cut came a week before the next scheduled meeting on January 30th 2008.

The Feds message by cutting the interest rate by 0.75 percent is that they are doing whatever it takes to avoid an economic recession. This is the largest rate cut in federal funds rate since 1982, when rates were at 20 percent to drive down inflation.

If you have an adjustable rate mortgage you may benefit from the Feds decision to cut interest rates. When your interest rate resets it is based off of the current interest rate plus the margin of your mortgage loan. Short term interest rates are now lower than a year ago and overall mortgage rates are at their lowest point in over two years.

Even though it may be harder to qualify for a mortgage loan, those with good credit now have the ability to qualify for a new home mortgage as mortgage rates continue to decrease. With many believing that home prices are close to rock bottom, homebuyers are now able to find great deals on homes at an affordable price.

The emergency rate cut is likely to drive up mortgage applications as homeowners and homebuyers seek to find the best mortgage available.

Submitted by admin on 1/22/08
Sources: www.sun-sentinel.com www.associatedcontent.com