Paul Pastor Realty Group

Serving All Your Real Estate Needs Valley Wide!

 

Paul Pastor Blog

10/12/2008 - As you have probably heard, the feds lowered their key rate 1/2 point to 1-1/2 %, putting the prime lending rate at 4-1/2% for consumers and businesses. We hear much about the Federal Reserve rate cuts, but often we do not understand how these rate changes affect us as consumers. Much of that reason is because the full effect of rate changes are not totally felt immediately. Its realized effect is a gradual process over time. The Fed rate changes take time to filter down through the economy to the consumer level. It often takes one to three months before lenders reduce interest rates following a Fed rate cut. In general, the Federal Reserve funds rate is a percentage rate that banks charge each other for loans (money). So a rate cut stimulates the economy by making money less expensive for borrowers. Rate cuts tend to increase activity on the stock exchange, which helps some mutual fund accounts, and they lower credit card interest rates.

Eventually, some mortgage rates (adjustable) as well as auto loans, can be favorably affected by a Fed rate cut. Normally, fixed rate mortgages are not immediately affected. On the larger scale, lower rates make the U.S. less attractive to foreign investors (less return on their investments), which makes the American dollar worth less compared to other currencies. That helps us sell more of our domestic goods as exports (due to their affordability), but on the other hand it makes things we import more expensive. Cheaper money, which causes us to spend more readily, can push prices up (supply and demand) and lead to inflation. Although the people in the stock market like paying less for credit, if the economy leans too heavily toward inflation, the Feds will then want to increase the rate to again offset that condition, as it obviously becomes a 'never-ending' balancing act.

The great news for potential homebuyers is that home mortgage rates are becoming progressively more favorable, and this would be a good time to take advantage of the depreciation in the current housing market by investing in real estate. It has never been a better time to invest in your future. Those who are financially capable of seizing the moment, are those who will realize the greatest return on their investment as the housing market rebounds!
 
 
 

Paul Pastor, ABR, CRS, GRI
 Broker-Owner

Pastor Real Estate Team

8494 E. Cactus Wren Circle
Scottsdale, AZ 85266

Office: (480) 575-5290
FAX: (480) 575-5291

Email:
Paul@paulpastor.com
PJ@paulpastor.com
Kasey@paulpastor.com


Paul Pastor Reality Group
ABRCRSGRI
R    Equal Housing    MLS

A percentage of every commission we earn is donated to the ‘Make a Wish’ Foundation.

Make a wish foundation
 
www.paulpastor.com