FED Just Raised the Discount Rate - What does it mean to you?

FED Just Raised the Discount Rate - What does it mean to you?

Minneapolis, MN: Yesterday, the Federal Reserve Board announced an increase in the "Discount Rate" up to .75%. This is seen as a small step and signal that the super low rates and propping up of the financial system is slowly coming to an end. This move was not unexpected, and is part of the normal and expected gradual withdrawal of the high reserves already in the system, and a nudge by the Fed's for banks to borrow from private equity sources to reduce reliance on the Fed for low cost funds necessitated by the housing crisis.

The discount rate is the rate at which member banks can borrower money from the Fed. The Discount Rate is not the same as the Fed Funds Rate, which is the rate banks charge each other for overnight borrowing, and which impacts the Prime Lending Rate that credit cards and home equity products are usually priced off.

The move will not directly effect home mortgage loans

As a Minnesota Mortgage Lender, we are more concerned with inflation, excessive supplies of government bonds and the major game changing event with the end the the Fed's purchase of Mortgage backed Securities by March 31st. This action by the FED will clearly drive home mortgage interest rates higher.

If you are on the fence about buying or refinancing a Minneapolis, St Paul, all of Minnesota or Wisconsin home, you should do it now.

If you have questions about the home buying process, call 651-552-3681, APPLY ONLINE 24-hours a day via our secure application. There are no costs or obligations.

Joe Metzler is a Certified MN Mortgage Specialist (MMS). He and his team at Mortgages Unlimited are proud to provide many of the Minnesota First Time Home Buyer Programs. Call him today or click HERE to apply for your Dakota County MN First-time Homebuyer loan and to make your home buying dream come true!