The Federal Reserve made a surprising mid meeting rate cut of .75% this morning on the Fed Fund and Discount Rate, just one week before their scheduled meeting.

The cut this morning was the largest single rate cut since Oct 1984 when the rate was cut 1.75%. The mortgage industry needs lower interest rates if there is going to be a significant turnaround in the credit markets.

Over time, rate cuts should stimulate economic growth by making it cheaper to borrow money for consumption or investment.  Banks typically lower their prime lending rate for their best customers in lockstep with the Fed.  Mortgage and commercial loans, however, are based on interest rates set in competitive markets, which may or may not follow the Fed's lead.

The mortgage industry needs lower interest rates if there is going to be a significant turnaround in the credit markets.  This is good news for mortgage rates!

Brad Dinkel

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