Wall Street predicts The Fed will cut rates once again today. The prediction is that the Fed Funds rate will be lower to 1%. This will be the lowest it has been since 2004 (currently we are a 1.5%). Some are even predicting an even bigger cut, lowering the rate to 0.5% – 0.75% which would be a historic low.
What Does This Mean to San Mateo Home Buyers?
Cutting interest rates are meant to restore stability to the financial markets and offset recession by stimulating the economy.
How Does This Stimulate the Economy?
The Fed Funds Rate is a determining component of the Prime Rate (Prime Rate is the Fed Funds Rate plus 3). The Prime rate is the rate which home equity lines of credit, construction loans, car loans and credit cards are based. Cutting the Fed Funds Rate lowers the Prime Rate meaning lower interest charges to the San Mateo borrower. The thought is, with more dollars in your pocket the greater likelihood you will put these dollars back into the economy by doing what we do best, Blowing Our Wad!
What Does This Do to San Mateo Mortgage Interest Rates?
Very little and if it does have an affect, the trend is that it will push San Mateo Mortgage Interest Rates higher. Again, cutting the Fed Funds Rate is used to stimulate the economy, fight off recession and can push us more towards inflation which is the enemy of San Mateo Mortgage Interest Rates. So remember, the trend is that positivity for the economy means higher San Mateo Mortgage Interest Rates.
I would be glad to answer any specific questions or go into greater detail. I am here as a resource for you, so keep the questions and the comments coming.
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Chris Williamson is a Mortgage Advisor with Mortgage California specializing in San Mateo Mortgage.
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