The Federal Reserve and how the cut affects condos

Yesterday the Federal Reserve cut interest rates by 3/4 of a point. This was a surprise cut and it is a huge cut. It was done to surpress the possibility of a recession in this country. Many people are left wondering, how does this cut affect me? Well for condo owners, it could directly help you if you are trying to re-finance a mortgage or if you have an adjustable ARM payment about to adjust. Your payment will now adjust to a lower rate than it would have and your payment will be directly lower. If you are a borrower with good credit, this may also serve as a good opportunity to refinance your loan or purchase a new home or condo. This i actually the best market I have ever seen to buy a condo right now. Prices are insanely low, and discounts and incentives can be found widely across the country. The only thing is that you have to have good credit and be able to come up with at least 10% down in the market to get a good loan.

The reason loan rates drop is because investors were buying up treasuries and bonds. This causes long term mortgage rates to fall. The Fed dopping rates to an affordable rate also makes a difference to millions of people with adjustable rate loans. It was generally a mistake to get those loans in the first place and now these people have the opportunity to lock into a good fixed rate loan.

The Fed dropping rate has a direct effect on people that have home equity lines of credit, including myself. These loans are generally ties to the prime rate which falls when the Fed funds rate falls. For someone with a $100,000 HELOC, this cut could drop their rate by close to $100 per month in some case which is huge for the economy and helps to prevent our country from slipping into a recession.

Overall, this is very good for the economy and we will see the positive effects over the next few months. Kudos to the Fed on this one.