Federal Reserve Cuts Rates Even More

The Federal Reserve faced with a slowing housing market and other factors, cut the federal funds rate to 4.5% this Wednesday. This is the second rate cut this year in an effort to bring more positive activity to the economy and it also aims to keep our country from going into a recession.

Consumer with Home Equity Lines will benefit because with this Fed cut in rates, the prime rate will come down as well. Heloc’s are based on the prime rate. On the same token this rate cut will also influence the “short term rates” which are used as base for the ARM loans. Therefore this rate cut could help you refinance or buy a home.

Fixed Mortgage rates don’t always react as expected by the movements the Federal Reserve makes. The day after the first cut occurred on September, the 30-year fixed averaged 6.32% nationally, then it rose and then it fell again ending up at 6.31% last week.

The Fed believes this may be the last cut needed to deal with the economy’s trouble.

Some of the statements from the fed were “Economic growth was solid in the third quarter, and strains in financial markets have eased somewhat on balance” but “some inflation risks remain.”

As a friendly history reminder the Fed raised the federal funds rate quarter-point (0.25), 17 times over two years beginning on June 2004 and with the last increase happening in June 2006. Then the Fed decided on Sept 18 to cut the funds rate by a half point (0.5) and one more quarter-point (0.25) today leaving the rate currently at 4.5%.

No more rate cuts are expected at this time.

October 31st, 2007 · Filed Under Mortgage - Loan Information

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One Response to “Federal Reserve Cuts Rates Even More”

  1. Buyer incentive no mortgage payments up to six months on November 2nd, 2007 5:36 PM

    [...] In addition to benefiting from the increase of inventory in homes for sale, you may also benefit pretty soon from the actions the Federal Reserve took on Wednesday [...]

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