Fed drops fed funds rate half point!

[jIM_Ohio]

Actually the fed funds rate only affects short-term interest rates. Long-term and mortgage rates are not well-correlated to the FF rate. In fact, if the Fed wanted to ensure lower long-term rates, they would raise the short-term rate. This would tell the bond market that fighting inflation is a higher priority than fighting recession, which in turn causes a bond rally, which in turn lowers long-term bond rates, which in turn lowers mortgage rates.

yes... rates dropping will drive up the price of bonds right now... but the refinance boom which started this sub prime mess came when fed was lowering rates. So short term, mortgages rates will increase (as bond market), once bond market stablizes, might be a good time to lower the mortgage rate a few hundred $$.

[Aleta]

Sweeps: As others have said before me, it's good to have you back. We've missed you and your information. Many thanks.

[jIM_Ohio]

Actually, this is the worst thing they can do for housing affordability. This is a big part of what caused the mess (lax lending standards and record low interest rates). Without this artificial manipulation of the markets things would come back down to earth (housing prices) a lot quicker. As I said before, this is only prolonging the inevitable pain. Higher interest rates will equal lower (and more affordable) housing prices, not the opposite. I'd rather be on the hook for $250k at 8% than $500k at 4%.

This softens the blow to the debt bubble we are in. The problem is still there (people borrowed too much), but it keeps the forclosures for some off for around 3-6 more months.

In the next 3-6 months watch the employment rate. it went down last month, and if it keeps going down, a recession is among us.

[sweeps]

Related story: Consumers get little relief from Fed cuts

For debt-weary consumers, the Federal Reserve's decision to shave interest rates on Tuesday is welcome news for their stock holdings but won't do much for their mortgage payments or savings accounts.

[PrincessPerky]

Hey BA! Went on hiatus for a little while. I'm a dad for the second time! Great to see you again.

Congrats!

[sweeps]

Congrats!

Thanks

[Broken Arrow]

Yes indeed, congrats sweeps!

Actually, I didn't even know you had A kid to begin with... or that you're even married. Heck, after finding out that many of the members here are female... I question that you're even male....

But then, I guess kids would prove otherwise.

[sweeps]

Wow, ING worked fast to drop their rate. As this post points out, ING was really S L O W to raise their rates as the fed funds rate was going up. But as soon as it went down, ING couldn't lower their rate fast enough.

[EverydayFinance]

I view this rate drop as a band-aid. Our economy's undergoing a crisis with the credit crunch and continually weakening dollar. I'm still long, but now I've hedged with multiple instruments. I've also branched out into Prosper.com as a non-correlated return instrument.