You’re probably aware by now the Federal Reserve has voted unanimously to lower the overnight lending rate, or the federal funds rate, to .25%, it’s lowest point since 1954.
The goal of the Fed’s here is to stimulate the economy. How you ask? The idea is that consumers, particularly large consumers such as businesses, will begin to borrow and spend due to the cost of the borrowed funds being so cheap. Will it work – who the heck knows? Only time will tell. Our hunch is it’s going to take more (such as the job loss bleeding to stop); but, we are still optimistic. Why not, right? Being pessimistic isn’t going to do anyone any good.
BUT, for those of us with a home equity line of credit, this is a great thing. This means the prime rate will drop to 3.25%! Wow! And some of you may have a line of credit with terms at prime minus some %, so you could be looking at borrowing against the equity in your house at less than 3%. Truly amazing. Please though – remember that these rates could go up just as fast as they went down. So use these line’s of credit wisely.
I’m sure the main question most of you have is: “will the mortgage rates go down as a result?”. As of now, the answer still seems to be no. It appears the market for mortgage backed securities has hit somewhat of a bottom, putting rates in that 5.5% range. But one thing we’ve learned over the last few months is that the only certainty is volatility. Rest assured we are monitoring rates and will get the word out if they dropped as some have speculated.