Fed Cuts Rate by 50 Basis Points, Impact on MF Financing Still Unknown
- Oct 08, 2008
By Anuradha Kher, Online News EditorNew York–The Federal Reserve today ordered an emergency interest rate cut of half a percentage point, knocking the key rate down to 1.5 percent.The Fed fund rate is the interest rate that banks charge each other for overnight loans.While this cut will help lower credit card rates as well as rates on automobile loans and business loans, mortgage rates may not fall so easily.Typically, a reduction in the Fed funds rates does eventually lead to a fall in mortgage rates. Currently though, investors are so nervous that they do not want to own mortgage debt and industry experts believe this will keep those rates high. The spread between the Fed funds rate and mortgage rate is also unusually high rate now.“It is too early to tell how this rate cut will impact the interest rates for multifamily borrowing,” Shane Shafer, vice president for Sperry Van Ness, tells MHN. Shafer specializes in the sale of multifamily properties in Orange County. “I am looking at the spreads and they have been going down. From the reaction I have been getting from investors, I can say they are waiting and watching to see what happens.”The European Central Bank, the Bank of England, and the banks of Canada, Sweden, and Switzerland also cut interest rates.