The Federal Reserve surprised everyone yesterday with an emergency intersession rate cut of .75%, the deepest cut in the Fed Funds Rate since 1984. The Fed Governors are acting in direct response to recent reports that the country is on the brink of recession.

If you have credit cards, auto loans, HELOCs, or an Adjustable Rate Mortgage, the Fed’s decision to cut this key interest rate is great news. For long-term mortgage rates however, this could signal the beginning of the end for the lowest 30-year home loan rate borrowers have experienced since 2005.

First, we need to talk just a little about the CUT in Federal Reserve rates.  This may be just the shot in the arm that the economy needs, although there is a good chance that the FED will cut more next week (watch the news on January 30th).  Also, the quick agreement between the White House and Congress seems to have pleased Wall Street enough to stabilize the stock market, at least for a while. 

However, the ultimate effect of the rate and tax cutting is going to be perceived as INFLATIONARY, and that’s bad for long term rates, even though we are seeing long term rates go down right now.  In any case, NOW is the right time to lock in long term fixed rate financing, because once the inflation engine gets cranked up again, it will be hard to slow it down.

The bottom line is this: if you are thinking about buying property (either as your residence or investment), you may not want to wait for property prices in Cherokee County to drop further. Even if they do, you may eat up your savings in higher interest rates. If buying is not on your radar this year, you may want to look into refinancing your current mortgage now. None knows for sure when rates will start creeping up.

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