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The Federal Open Market Committee (FOMC) announced today that it has dropped its Fed Funds rate to 1 percent–near the lowest it’s been in U.S. history. This is the rate at which banks loan money to one another, and it impacts mortgage rates for adjustable rate mortgages and home equity lines of credit.

The decision to cut rates reflects the Fed’s ongoing actions to try and stem the economic crisis gripping the country.

According to Quicken Loans Chief Economist Bob Walters, this cut by the Fed is likely to have very little effect on the markets.

“The Federal Reserve has decided that further action is required to help guide the markets to some form of stability and to encourage more inter-bank lending,” Walters said. “While this sounds good in theory, the Fed’s cuts of late have done very little to affect the markets. It appears the government is going to have to continue calling plays from a different playbook to stem the market volatility long term.”

“Despite the turmoil in the market, we continue to see increased interest in mortgages, with many consumers looking to FHA loans to leverage real estate that has become priced under its reasonable market value,” Walters added.

The new Fed Funds rate is the lowest it’s been since May 2004, and is almost the lowest in history. In the past, the Fed Funds rate has gone as low as 0.85%.

Related Info

• The Fed Funds rate dropped. Will mortgage rates follow suit?
• Fixed-rate mortgages and FHA loans offer low rates with payment security.
• No one makes it easier to lock in your low mortgage rate today!

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