What a Fed Rate Cut Could Mean
We’ve been hearing so much about the “Fed” possibly cutting those rates lately on and off, and you were probably wondering what that really meant for regular folks like you and me. At least I know I was.
That is, I was wondering if it really meant anything to me personally or your personally if you were to say, apply for a mortgage loan and pursue the American dream of owning your own home, or maybe selling your home, or upgrading to a newer, better home. After all, when the Fed cuts rates, it is mostly the mortgage lending market that is impacted. Right?
Well, yes, it is largely impactful to the mortgage lending market when there is a rate cut, and since much of the focus on our failing economy is on the miserable mortgage crisis, that is what we will focus on.
Well, the answer kind of surprised me, and if I understand it correctly, when the Fed cuts rates, even at the smallest or seemingly largest percentage - well, make that a fraction of a percentage point, it really does not affect what you personally are going to pay or what you are able to be offered by banks competing for your business.
In other words, it is really the prime rate that is set and considered the bar by which all banks adhere to, which is more or less decided on by what is called the bond market. Since banks use this a benchmark for offering competitive rates to their customers (prospective loanees), because they know this percentage is publicized, and the educated consumer will use this percentage as a measuring stick by which to shop for a new general loan, mortgage loan, and even some credit card.
