Fed Cuts Interest Rates

The Federal Reserve has cut interest rates by one-quarter of a percentage point yesterday, in what many economists are predicting might be the last such cut by the Federal Reserve for a while. It is the seventh cut since late August, and it comes as the Fed is trying to balance between fears of impending recession and signs of inflation. The Federal Reserve Funds are now at 2.00%, which means most banks will now be lowering their Prime Rate to around 5.00%

What does this mean for home buyers, home sellers and homes for sale in Rochester Minnesota?  Any time the Fed cuts rates it’s viewed as a positive move by the general public.  In actually however the Fed interest rates are not directly tied to mortgage rates.  Mortgage rates are tied to the 10 year treasury bill and influenced more by bond prices.  When the fed cuts their rate, it’s good news for the consumer as any consumer debt like car loans, and home equity lines of credit will usually adjust accordingly.  Bottom line it does make buying or selling a house a little easier as the home buyer has a little extra free cash to spend if they are not spending as much on other consumer debt.

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