As expected, the Fed cut both the Discount and Fed Funds rate by .25% today. The big hitters on Wall Street were hoping for a half a point cut, so stocks took a dive as soon as the news was announced. The cut in the discount rate will mean that banks will lower the Prime Rate by .25%. So this cut will give consumers with home equity loans and some credit cards immediate relief.

How will this affect mortgage rates? The Fed can only change short term rates. Mortgage rates change based on activity in the mortgage backed securities market. Rates there have been extremely volatile over the last week, going from a 2 year low early last week, then jumping nearly 3/8ths of a point higher over the last several days. Usually mortgage bonds sell off before the Fed meets. Today they started strong and got stronger after the Fed announcement. This means that mortgage rates are better today and will probably go lower in the days ahead.

But don’t expect this to last. We are on a roller coaster, and there will be more ups, downs and sharp curves ahead.

Illinois mortgage Rates and News.

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