Dealmakers Blog – Ramblings of a Real Estate Mogul

Posted By: Sean Terry | December 16, 2008

What does the Fed Rate Cut Do For You?

Sure mortgage rates will drop, but the banks are essentially saying that .25% is a great rate and banks should be happy to have money that is stagnant but not losing is a good investment.

The Federal Reserve has cut its target for a key interest rate to the lowest level on record and pledged to use “all available tools” to combat a severe financial crisis and prolonged recession.

The central bank says it reduced the federal funds rate, the interest that banks charge each other, to a range of zero to 0.25 percent. That is down from the 1 percent target rate in effect since the last meeting in October. I get the feeling this is not what Bernanke signed up for when he took the job as Federal Reserve Chairman.

I just spoke to Ari Schiff from US Capital Mortgage and he said that the rate for an Investor Loan at 75% loan to value is 6.75%. And if they would like to “Buy Down The Rate” for 1 point the rate will be 5.75%.

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