What Will The Fed Do?

Shortly we are going to find out what the Fed is going to do with the Fed rate. All bets are on another sharp delcine in the rate, perhaps 50 basis points. Will this translate into lower interest rates for homeowners? Not necessarily. Here is why. Banks are businesses and they want good loans. They are also aware that funding for many loans are tightening or have tightened up. So they are not interested in marginal loans or loans that generate little to no profit. So banks may actually do nothing with their interest rates, or we may see a slight increase. Case in point, when the Fed unexpectedly reduced the Fed rate 3/4 of a point, the interest rates on 15 year and 30 year loans acutally increased slightly. We shall see what happens today. At the end of the day what matters most to buyers is, can I get a loan to purchase the house I want? The answer is yes. But if you are a buyer who has shaky credit or conventional wisdom says that you should not be purchasing that house, you may find it more difficult to get a loan. All in all that is good for the economy right now.