Feds Drop Rates another 1/4%
Posted by admin under: Main Dec 12
The Federal Reserve cut both the Fed Rate and the Discount Rate by 1/4% today – a move that was anticipated by most in the market. Some even felt a 1/2% cut was possible but not after the strong jobs reports last Friday. So what does it mean and how will it affect the Outer Banks Real Estate Market?
Discount Rate (currently at 4.75%) is the rate banks borrow funds from the Fed. It matters but not directly.
Fed Rate (currently at 4.25%) is the overnight rate for lending money. This one matters to most of us – see Prime Rate.
Prime Rate (should be 7.25% tomorrow) is typically 3% above the Fed Rate. This rate is what Home Equity Lines of Credit, some Credit Cards and Auto Loans are based on. This matters to most. If you have one of the accounts listed above and your rate is based on the prime rate, you should see a small reduction in your January bill. That means you can buy your loved ones much nicer presents this year…
For those that own property on the Outer Banks that includes a Home Equity Line of Credit – your interest rate has now dropped 1% since September. Not a huge savings but it sure doesn’t hurt having smaller payments during the off season. The reduction in rates also makes it easier to qualify for a loan. There are plenty of homes to choose from and motivated sellers.
What it doesn’t mean:
Interest Rates for traditional mortgages did not go down by 1/4% today. In fact, first mortgage rates sometimes bump up a little after a rate cut. The bond market seems to like the reduction because bonds and rates are holding steady.
Source: Feds Drop Rates another 1/4%
Wednesday, December 12th, 2007 at 8:59 am and is filed under Main. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.