The FED Cuts the Federal Funds & Discount Rate

As expected the FED cut the Federal Funds rate and the discount rate. A bit unexpected was that they cut them both by .50%. This will definitely not be a fix for the slumping housing and mortgage market, but it will be a nice boost. It is yet to be determined the exact effect these cuts will have on mortgage interest rates in the days to come, but we can most certainly expect some positive effect! Interest rates were already reasonably low and the main problems still are liquidity and a surplus of housing inventory.

Liquidity-
There must be enough money available to make new loans! Many companies have folded and banks and investors are leery to invest money into the mortgage market. Trust must be rebuilt between buyers and holders of debt.

High Inventory-
Until the surplus of homes on the market is liquidated, times will be tough! The high amount of foreclosures are only adding to this surplus. Once this inventory is sold off, things should get back to normal.

With that being said , the FED made a bold statement that there is help on the way! Finally there is some good news to report in this crazy market and we can all keep our fingers crossed that this is only the beginning of what lies ahead!

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