Mickey Carlton's comments today about the interest rates this week:
Mortgage interest rates have waited quietly for the Federal Reserve to announce their latest "interest rate" decision. Thirty-year mortgage money was offered at 6.375% to 6.875% prior to the release of the Fed's report. Individual loan rates depend upon loan size and the creditworthiness of the borrower.
The Federal Reserve lowered both the Fed Funds rate and the Discount Rate by .5%. This will have an immediate and positive effect on consumer short-term borrowing. Home equity loans and credit card rates will drop right away. However, we should not be overly convinced that long-term rates will fall as quickly.
The Federal Reserve lowered both the Fed Funds rate and the Discount Rate by .5%. This will have an immediate and positive effect on consumer short-term borrowing. Home equity loans and credit card rates will drop right away. However, we should not be overly convinced that long-term rates will fall as quickly.
The Fed Funds rate is the rate used by banks to borrow from each other in the overnight market. The Discount Rate can be used by banks to borrow directly from the Federal Reserve in the overnight market. These 24 hour rates are the only rates the Fed controls, directly. The mortgage rates that we live on are set by market factors. Long-term lenders sometimes react to a rate cut by charging higher rates on long-term money. Their concern is that the Fed's rate cuts will allow inflation to re-enter the market. Inflation, of course, is the great enemy of long-term lending. I will issue an update to this report in a day or two. Today's market closed before a full reaction could be measured.
