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The Federal Reserve Open Market Committee (“Fed”) today dropped its Fed Funds Rate, the overnight rate at which banks lend to each other, by a quarter percent. This cut, the third in as many meetings, will impact short-term interest rates such as those on adjustable-rate mortgages, credit cards and home equity lines of credit. This will have a less direct impact on longer term rates, like fixed-rate mortgages. Those rates are determined each and every day in the global bond markets.

Quicken Loans Chief Economist Bob Walters says while the Fed took a cautious approach, their actions should help loosen credit for consumers.

“The Fed’s decision to drop the Feds Fund Rate by 25 basis points was widely expected,” Walters said. “Long-term interest rates dropped immediately after the announcement, continuing a six-month trend of falling mortgage rates. The housing market is still challenged, but falling mortgage rates will lead to lower monthly house payments and will increase demand. The Fed is continuing to fulfill its role as the banking system’s primary lender. The central bankers are letting the markets know they realize the credit markets are struggling right now and they are providing liquidity to assist those markets.”

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