The Federal Reserve cut it Fed-Funds Target Rate by .75 percentage points today to 2.25%. The Fed has now cut the rate by a full 3% since September.
Though many investors had hoped for a full point reduction, the 75 basis points was only the second time the fed has cut that drastically since at least 1994. And any disappointment on Wall Street was quickly put aside, as the Dow Jones Industrial Average recorded a gain of more than 420 points, a surge of 3.5%.
Commercial banks began lowering their prime rates by an equal amount, to 5.25% from 6%. Some variable rates, especially Home Equity Lines of Credit (HELOC), are directly tied to the prime rate so consumers should see some immediate relief.
Mortgage Rates
Many of the Fed's rate cuts to date have not fully filtered through to home buyers. Though the Fed started cutting rates in September, rates rose above 6% in February from about 5.5% in December. They've only recently dropped below 6% again.
Among "Jumbo" loans, rates are actually higher now than they were last July, mainly because investors are reluctant to buy securities backed by such loans.
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