Orlando Real Estate

Fed Rate Cut

September 24th, 2007 2:33 PM by David W. Welch

The Fed cut the rate banks charge to loan money to each other last week by 50 basis points. What does that mean to the real estate market? The answer is "nothing directly or tangibly." The effect of the rate cut was seen immediately on wall street because the direct tangible effect to business will be almost immediate. With the infusion of money into the money supply and the rate cut last week, banks will be a little looser with their money. Commercial banks loan money to businesses that use that money to expand. Business expands the economy expands and investors expectations of profits rise.

The rate cut also effects home equity lines of credit which many home owners have, because they are tied to the prime rate which is tied to the Fed rate. Hopefully the optimism spawned by this move will get some would be buyers off the fence. There is also usually a trickle down effect of the rate cut that could lead to slightly lower mortgage rates over the next couple of months. There is more on my website www.davidwelch.com.

 

Posted in:General
Posted by David W. Welch on September 24th, 2007 2:33 PM

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