Fed Action

In light of the Federal Reserve slashing the Federal Funds Rate and Discount Rate 75 basis points in less than 60 days, I thought I would dispel the myth that mortgage rates are dropping as well. The Federal Reserve acknowledges the need for "liquidity" in the market place. Why? They know that unless banks, wholesale lenders, retail lenders and others have the funds to lend then regardless of what mortgage rates are there is no chance of a housing recovery! The government is trying to give lenders "money to lend". The largest factor behind the "credit crunch" is the fact that lenders had little to no money to lend to qualified borrowers. Typically, wholesale lenders use mortgage lines of credit to fund certain loans and when the "credit crunch" hit these lenders had their lines pulled. Therefore, the Federal Reserve is trying to push money back into the financial market place for lenders to lend, for buyer's to access and the end result would be for the housing inventory to decline thus bring values back in line.

Don't get me wrong mortgage rates are GREAT! However, do not be fooled that The Federal Reserves actions are to ultimately lower mortgage rates. The problem is not that rates are high, they are just the opposite and it's not like there are no homes to choose from again it's quite the opposite as inventory of unsold homes have never been higher. The financial market's have a "credit crunch" and they (Feds) are trying to reverse this. In fact, it's a great time to be a home buyer right now you have a plethora of homes to choose from at discounted prices and unbelievable rates to boot!

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