The Fed Cuts Rates 0.75%. The impact on Mortgage Rates.

The Federal Reserve cut short term interest rates for the 6th consecutive time yesterday.  This follows unprecedented action from the Fed over the weekend where they bailed out Bear Stearns.  Rate cuts are often assumed to be good for mortgage rates, but this is often not the case.

 Why Did They Cut Rates?
The Fed is trying to stimulate the economy and improve consumer confidence in Wall Street.    Our economy is feeling the impacts of a slow housing market coupled with very tight credit markets.  By effectively increasing the money supply, the Fed is trying to improve things somewhat.

How Will This Impact Mortgage Rates?
Remember that mortgage rates are not directly impacted by the Fed.  In fact, Fed rate cuts are considered inflationary which is bad for the bonds which do directly impact mortgage rates.   The bottom line is that there are a huge number of issues which affect mortgage rates each day, and short term interest rates are just one of them.  The past couple of Fed moves have actually resulted in higher mortgage rates.

If you are looking to purchase a home or refinance, rates are still historically very low.