Feds Cut Rates Again, Spurs Home Buying - KCBD NewsChannel 11 Lubbock

11/6/02

Feds Cut Rates Again, Spurs Home Buying

For all intents and purposes, this is the perfect time to buy a house, because you can't beg, borrow, or steal a lower interest rate. According to Capital Mortgage Services CEO Royce Lewis III, rates are at a 40 year low, and they're expected to stay dirt-cheap for at least the next 30 days.

If you're looking to buy a house, you can't ask for a more favorable climate. The Fed just cut interest rates again and that instantly dropped mortgage rates.

"We noticed an immediate knee-jerk reaction where the market place responded," says Lewis.

The rate cuts give home buyers the ability to qualify for more loan or lower payments. So now, two bedroom homeowners are buying three bedroom homes, and three bedroom homeowners are buying four bedroom homes. Simply put, home buyers are able to get more bang for their buck right now, but experts say it won't last forever.

"It's a perfect time to buy. Rates are extremely low. The lowest they've been in 40 years. Whether they'll go higher, I will guarantee that they will, it's when, that you have to guess," says Lewis.

The rate cut move by Federal Reserve Chairman Alan Greenspan was actually made to stimulate the economy and the stock market, not to lower mortgage rates. So, once investors gain more trust in the stock market, mortgage rates will again increase. Why? Because investors will take their money out of mortgage back securities and put it back into the stock market.

When that happens, there's less surplus money in mortgage back securities to loan out to home buyers. Less money, higher rates. More money, lower rates. It's the simple law of supply and demand.

This move should also benefit sellers and realtors, because when there are so many people wanting to buy, it boosts prices.

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