Federal Reserve Lowers Interest Rates a Second Time
On September 18th, barely a month and a half ago, the Federal Reserve lowered two interest rates by half a percent each: The overnight lending rate was cut to 4.75 percent, and the discount lending rate was cut to 5.25 percent.
At the time, the Feds and other experts voiced concerns that while the lower interest rates would help ease the depression in the housing market, it could also speed inflation. Therefore, the interest rate cuts, at half a percent each, were intended to be modest.
Apparently, though, the Feds aren’t finished. On October 31st, both interest rates were cut again, this time by a quarter percent each: The overnight lending rate dropped to 4.5 percent, and the discount lending rate dropped to 5 percent.
According to the Feds’ official statement, the economy has recovered somewhat in recent months; the interest rate cut is intended to maintain economic growth by helping the housing market to recover. However, the official report also notes that inflation is still a concern.
Since experts predicted the last interest rates cut would have little effect on consumer loans, the same would seem to be true of this cut, particularly because the difference (a quarter percent) is even smaller. However, it is worth noting that the Feds intended the cut to counteract the downward trend of the housing market, which means that homebuyers should still benefit.
In fact, homebuyers have a unique advantage right now. With the second cut in less than two months, interest rates are now as low as they were about two years ago. At the same time, housing prices are down: According to the New York Times, U.S. homebuyers are paying on average 5 percent less than they were a year ago.
In other words, right now homebuyers pay less on property and on interest. Sounds like a good thing to take advantage of, doesn’t it?
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