Historic Fed Move Cuts Both Ways for Borrowers
Hot on the heels of its surprise inter-session rate cut of 75 basis points last week, the Federal Reserve cut key interest rates again, the fifth straight cut since September 2007. In its statement last week, the Fed said it had decided to cut the federal funds rate “in view of a weakening of the economic outlook and increasing downside risks to growth.” In other words, economic data suggests the US is on the brink of recession, and the Fed is acting accordingly.
Who benefits from this cut?If you have a loan that is directly tied to the Prime Rate, you will see an immediate benefit. Home equity lines of credit (HELOCs) and variable rate charge cards are the types of loans that will have an interest rate reduction on their next statement.
What does this mean for long-term rates? Long-term mortgage rates, the lowest we’ve experienced in years, could actually increase after today’s cut, based on historical performance and recent trends.
So if you’re waiting for long-term rates to fall further, don’t count on it. Your best chance to lock in the lowest rates since 2005 is now. Getting your application in process now will allow you to capture a great rate before it’s too late.
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Rae Anna Conforti and Michelle Jordan
Realtors.
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Prudential Tropical Realty
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