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BEN BERNANKE - "Substantive" Rate Cuts to Come - But Will They Spur Housing Demand?
Big news flash out of Washington, folks- Fed Chairman Ben Bernanke, in a speech to the Women in Housing and Finance, admitted concern over the continuing struggle in the U.S. financial markets, and ongoing weakness in the housing sector. 
Coupled with higher-than-expected unemployment rates in December, Bernanke suggested less concern on inflation risk, and heightened concern on continued sluggish economic growth.  Experts feel his remarks increase the likelihood the Fed will reduce it's benchmark Fed funds rate by 1/2% at it's next meeting on January 29th.  Recent rate reductions have been 1/4%.
Will the larger reduction impact the housing market?  Not immediately, many say!  Average 30-year fixed rate mortgages are just slightly higher than they were last year at this time.  Many adjustable rate mortgages are not tied to Fed rates, but instead dependent on the international LIBOR (London Interbank Offered Rate), which has recently been higher than the Fed.
Many borrowers will see their monthly credit card payments and home equity loan rates decrease, as these consumer rates are typically tied to the Prime Rate, which, in turn, reflects current Fed Funds rates.  This could benefit the economy, as many borrowers will be left with more money to spend on other things.
But ... more

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