Tuesday, September 18, 2007

Federal Discount Rate Drops 1/2 %

The Federal Reserve today surprised many banks and economists by lowering the Federal Discount Rate a full .500%.

The most immediate impact for most homeowners is drop in their home equity lines of credit. These loans are tied to Prime Rate, which has just dropped to 7.75%. A half percent drop in these rates is very significant.

The full impact on mortgage rates may take a few days to become evident, although we do expect to see a fall in some adjustable rate loans very quickly. Thirty year fixed rate loans are not dependent on Fed actions. If the market views the Fed moves as inflationary, fixed rate loans may actually rise.

Stay tuned, as we are sure there will be lots of rate news over the next few days.

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