FED Rate Hike: What It REALLY Means To The Real Estate Industry | TheREsource.tv
Summary below!
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SUMMARY:
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The Federal Reserve finally did it, the finally raised the federal funds rate a .25
point! The first rate hike in nearly a decade and some detractors say it’s too little to late but let’s not talk about Fed policy let’s talk about how this actually effects our
Industry! Now, some lenders may know this already and if you don’t stick around because you need to.
Realtors, yes this is about mortgage but you also need to know this as your clients and probably some people in your office even will make the comment “Oh
Interest rates just increased, that’s a bummer and will reduce my buyer buying power”!
No, No it won’t! Guys what happen last week doesn’t directly effect mortgage rates! It does indirectly but we won’t get into that.
The Feds raising the
Fed Funds rate a .25 point doesn’t mean the 30 year fixed just increased nor the 15 year fixed for that matter!
Actually quite the opposite!
Mortgage rates stay lowed! Let me quickly explain. The federal funds rate is the interest rate at which depository institutions (banks and credit unions) lend reserve balances to other depository institutions overnight, on an uncollateralized basis. Now in
English! The Feds raising the Funds Rate wont effect mortgage rates but it will effect short term money. Car loans,
Personal loans, credit card rates, short term money in other words. Let me say it this way - the interest rate that applies to investors is the
Federal Reserve's funds rate. This is the cost that banks are charged for borrowing money from
Federal Reserve banks. Why is this number so important? It is the way the Federal Reserve (the "Fed") attempts to control inflation. By influencing the amount of money available for purchasing goods, the Fed can control inflation. Other countries' central banks do the same thing for the same reason. Basically, by increasing the federal funds rate, the Fed attempts to lower the supply of money by making it more expensive to obtain. See, no direct effect on mortgage rates so let’s all take a deep breath.
See the full story here & join the conversation: http://www.theresource.tv/archives/fed-rate-hike-2015/
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