Fed Cuts Rates…again

Wednesday January 30^th,

MSNBC reports that the Federal Reserve just cut key interest rates for the second time in just over a week reducing the federal funds rate by one half percent. The Fed action reducing the rate to 3% follows a three-quarter percent reduction on January 22 after the financial markets had plummeted on fears the US economy was heading into recession. The half point cut today followed news that the economy has slowed significantly in the last three months with gross domestic product expanding at a very slow pace. MSNBC further reports that Chairman Ben Bernanke stated that the financial markets remain under considerable stress. The Fed move was approved by a 9 to 1 vote. David Jones, chief economist at DMJ advisers, says he expects at least one more rate cut, probably a quarter-point, at the next Fed meeting in March or April.

One of the most common questions that we receive whenever we have a reduction in the Fed rate is the impact on mortgage interest rates. Although there is no direct relationship between the prime rate and long-term fixed mortgage interest rates, frequently a cut in the prime rate will lead to an improvement in financial markets which often leads to a reduction in long-term mortgage interest rates. At this writing our 30 year fixed rate is 5.5%

To view our interest rates updated daily please login to http://www.northstonemortgage.com