subprime loan crisis-reduced rates?

Question

Federal reduced the federal funds rate. what is the effect of this move? i mean how has it helped so far?

no, im not in need of help since i have never taken any sort of loan in my entire life before!-yet. just wanted to know if the cut rates have helped so far.

Answer 1

It should spur customers to buy new homes or refinance their existing homes. We'll see. It is a little early to tell if it is working. So far, not much has happened- homes are still taking a long time to sell and the mortgage industry is still in a slump.

Answer 2

When the fed meets to consider what the interest rates should be they do not even consider the effects that it has on sub-prime adjustable rate mortgages. The fed looks at the risks to the economy from both inflation (growing too quickly) and recession (growing too slowly) and tries to get a 'goldilocks' type of rate that is just right (stimulates growth but doesn't fan inflation). Their tool, the federal funds rate aims to control these competing forces. Lower the rate and increase the amount of money available has generally resulted in businesses and consumers borrowing more money for some kind of purchase that generally stimulates the economy. Raise the rate and slow the rate of borrowing and slow down the economy.

When the fed changes the rate it does have an effect on sub-prime and adjustable mortages, they shouldn't have to adjust up so much (most banks react with a quick change to their prime rate which changes how much adjustable rate products move).

good luck!