Cindy's Blog

As you probably have heard, the Fed cut rates again yesterday by another .5%, bringing the Federal Funds Rate to 3 percent- the lowest it's been since June of 2005. Awesome, you say, but what does that mean for me?

The federal funds rate is the target interest rate for banks borrowing reserves among themselves. The discount rate is the interest rate that the Fed charges banks to borrow reserves from the Federal Reserve. The Fed wants to be the lender of last resort: It wants banks to borrow from one another at the federal funds rate before borrowing from the Federal Reserve at the higher discount rate.

Long-term rates, such as those for mortgages, don't respond directly to the Fed's short-term rate moves. Sometimes, mortgage rates move in the opposite direction when the Fed reduces the federal funds rate. But more often than not, mortgage rates eventually follow the Fed's lead. That is probably one of, if not the primary, motivation, for the central bank dropping the rates in the first place.

In a nutshell, rates are at tremendously low levels, so at the risk of repeating myself, it is a great time to buy a home. If you are on the fence, it may be a good time to jump off of it. If you are in a higher rate mortgage, it is definitely time to call your lender and check into refinancing.

We are definitely seeing a spark in the marketplace, but really, with the number of homes on the market right now, and the market still filled with price reductions, the combination of the loan rates and the market are the "perfect storm" to get you into a home this spring!