Latest Fed Rate Cut Will Free Up Capital, Increase Competitiveness in MF Lending Market

By Anuradha Kher, Online News EditorNew York–The U.S. Federal Reserve has slashed its key interest rate to the lowest level on record in its latest attempt to stymie a sharp slowdown in the economy amidst the holiday season.The Fed’s Open Market Committee cut its benchmark rate to between 0 percent and 0.25 percent, from 1 percent.A median of 84 forecasts in a Bloomberg News had predicted the Fed would halve the rate to 0.5 percent. President-elect Barack Obama on Tuesday said “we are running out of the traditional ammunition that’s used in a recession, which is to lower interest rates, they’re getting to be about as low as they can go.”On the issue of whether this latest rate cut will have any impact on multifamily lending, Kerry French, managing director of NorthMarq in Houston, tells MHN, “This latest cut is good for everyone at a time when we are looking for something that will help this credit crisis.“This move will make more capital available. The issue in the multifamily lending market is not the rate of interest on loans but of availability of loans itself,” he adds.French goes on to say, “One change, like this interest rate cut, can’t make a drastic difference. But it is designed to do something about the credit crunch. As a result of more free capital in the market, there will be more competition, so pricing will go down and loans will become cheaper. “Despite the fact that Fannie Mae and Freddie Mac are the only ones giving loans in this market, multifamily debt pricing at today’s rates is a bargain compared to 20-year rates,” concludes French.