In an effort to revive the economy the Federal Reserve cut the federal funds rate today but a half-point (0.5%). This lowers the rate to 1 percent – the lowest rate since 2003-2004. The last time the federal funds rate was lower than 1 percent was during the Eisenhower administration in 1958.
Today’s interest rate cut was the second half-point cut this month. The last one on October 8, 2008 was in a coordinated move with foreign central banks.
This year’s economic weakness has created huge declines in the price of oil and other commodities. While many economists believe the country is in a recession, they also believe the recent rate cuts and other aggressive actions by the Fed will help prevent a prolonged downturn and help unfreeze the credit markets.
If these aggressive moves by the federal government are successful in thawing the credit markets, it will be great news for real estate investors who are having difficulty financing their real estate investments.
Back in 1999, Fannie Mae introduced a pilot program that lowered the credit requirements on loans that it would purchase from banks and lending institutions. The program was is intended, in part, to increase the number of minority and low income home owners who tend to have lower credit ratings than non-Hispanic whites.