The federal reserve just announced that they have lowered the discount rate by 1/2 point to 5.75%. The stock market seems to have reacted favorably, as all major indices are up today, but how will the housing market react? This is difficult to judge.
BlogArizona ponders:
“…lower interest rates would obviously make me happy. Lower rates will decrease a buyer’s monthly mortgage payment, therefore enabling more people to qualify and buy real estate. But will lower interest rates really help solve the mortgage problem, or will it just create more inflationary worries? And as mortgage companies tighten lending standards, will new buyers who qualify due to lower interest rates even be enough to offset those buyers who no longer qualify due to tighter lending requirements?
My gut reaction is that this just won’t matter to home buyers. This won’t have the effect of spurring them on to purchase a home, as a result of lower mortgage rates. It’s good news for sure, but we all know that the discount rate isn’t closely tied to the rate that people pay for their mortages. This news will not have the effect of lowering 30 year fixed rates by 1/2 point. While the discount rate is a factor, the bond market is far more of a factor.
If real lending rates do go down, I’ll be sure to report it here, but for now, I’m seeing 30 year fixed rates are steady at ~6.5%, which is where they were before.
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