Tuesday morning the Fed jumped in and cut a key interest rate by .75 bps unexpectedly. This was a much needed cut after a global plunge monday that came from heightened fears of a recession. The cut from 4.5% to 3.5% was the biggest reduction in this target rate on record going back to 1990. It is also the first time the fed has changed the fund rate in between meetings since 2001 when the US was battling fears of a recession and terrorist attacks.

I have received numerous calls about the rate cuts affecting mortgages. It does not directly affect 15 and 30 year mortgages. The fed fund rate cut will directly affect prime which is tied to equity lines and or 2nd mortgages. The bond market is directly tied to our 15 and 30 year mortgages. After Mondays plunge this would typically indicate investors are selling off and placing money into safer areas such as bonds. When bonds are driven up, home loan rates on 15 and 30 year mortgages will improve.

How will this affect things here in SW Florida / lee county? Feel free to call Adrian at 239-677-7250 (located in fort myers, cape coral, fl) or blog for additional information.