What the FED rate cut REALLY means...

There has been so much talk over yesterday and today and I keep being asked by others, “what will the FED rate cut do to mortgages”… The answer to this questions is different EVERY time the FED cuts rates… You see it is NOT the rate cut that effects mortgages, the fed cuts the rate that banks charge each other for overnight loans. There is NO direct relation to the FED funds rate and mortgage rates. What DOES effect mortgage rates is the expectations of the market as to what the FED would do, and sometimes even more important… WHAT the FED chairman SAYS about the market after the rate change.

So, back to the question… For THIS rate cut, mortgage rates are and should continue to get better… they should be as good as they have been in almost 4 1/2 years! The FED will meet again on the 30th and most likely will cut rates again. The next time looks to be anywhere from .5–.75%. Now here is what I am talking about… the market generally is expecting a .75% cut at this point. So, if they do .75 then rates may not change much at all… if the only do .5 they may get much worse… If they do .75, BUT they SAY something that the market was not expecting… THEN… RATES go up or down based on that…

I guess the real answer is you NEVER know… once you see how market reacts then you know… The big thing to keep in mind is that there is no direct relation between the two. The exception is on home equity lines of credit… they usually are tied directly to the prime rate that is effected when the FED changes rates.

Hope this helps make things more clear, please feel free to call or email with any questions. If you are thinking of buying or selling now would be a fantastic time to take advantage of the low rates…

Mark Ryan

Broker Owner

Mark Ryan Group, LLC
KW Advantage Real Estate
Direct: 937-353-4600
Direct: 513-235-9261
Fax: 937-353-4599

Also, Visit my web sites for info. on Homes or general Real estate information.
http://www.MarkRyanGroup.com-- OR http://www.DaytonHomeInfo.com