The last few days have seen the Federal Reserve attempt to inject liquidity into the financial market without an interest rate cut. However, the general speculation after Fed chairman Ben Bernanke proclaimed that he is willing to implement an interest rate cut if necessary is that rates will fall by the end of the year. Some analysts think they may even fall in September. And this means that mortgage interest rates could fall as well. What would this mean for home buyers and those with home mortgage loans already? Inman News reports on what an interest rate cut could mean:
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"We believe there is pent-up demand in the
marketplace right now," [NAR economist Kevin] Thorpe said. Adding liquidity to the
marketplace would make it easier for prime and subprime borrowers to
get a loan, Thorpe said, and "that should help demand translate into
home sales."By providing liquidity, a reduction in the federal funds rate could
also help troubled borrowers avoid foreclosure by refinancing out of
adjustable-rate mortgages, Thorpe said, and reduce the rates on
conventional 30-year mortgages "by sending a signal to the marketplace
that the Fed is less concerned about inflation."
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