MS NBC reports on December 11, 2007. The Federal Reserve shaved a -.25% off the Fed Funds Rate & discount rate again.
Dow closes -300 (-2.2%) down after Fed’s announcement. Many traders and analysts were very disappointed at the rate cut. Traders were expecting a more aggressive rate cut of 50 basis points but, unfortunately it didn’t happen.
Many of the financial or Real Estate related stocks took a 5-10% drop today.
American Express -5%
Freddie Mac down -10.06%
Morgan Stanley -8.04%
Toll Brothers -3.41%
Home builders, REITS, Retailers sell off.
What does this mean to me Mr. Joe home owner/ Home buyer?
The Feds rate cut may improve consumer rates such as car loans, credit cards and equity lines. These short term rates will help consumers improve in such areas.
The Fed’s rate cut will also affect those millions of home owners who’s rates will be resetting next year. Those resets will be lower based on today’s news.
Home buyers can expect to secure a slightly better fixed period ARM loan at a lower rate.
We will see what effect the Fed’s rate cut will have on the bond market and treasury. Hopefully this will improve the long term rates such as 30 year fixed rate mortgages once the fury settles down with the market.