Tuesday, December 11, 2007

 

Fed cut and Dyersburg real estate

Well the Federal Reserve just cut the federal funds rate by 1/4 point to 4.75%. The fed funds rate directly affects credit cards, home equity lines of credit and auto loans. This rate also controls the interest rate charged on new home construction loans.

However, this rate does not directly affect home loan rates. Those rates are tied to the 30 year bond. Indirectly however, home loans are affected buy the feds decision to cut rates. When we have a slow market or slowing market economy, the 30 year bond yield usually begins to trend lower affecting home loans.

According to Freddie Mac, interest rates on 30-year fixed loans sank to 5.96 percent from 6.10 percent last week, landing at the lowest point seen since September
2005. Borrowing costs on 15-year fixed products fell to 5.65 percent
from 5.73 percent.

This should have a positive affect on the Dyersburg real estate market. As the interest rates drop, more people enter the market to purchase homes and many qualify to purchase a more expensive home.

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