The Federal Reserve’s short-term- interest-rate cut of half a point Tuesday should give a boost to local businesses and consumers, including some sectors of the hard-hit housing industry.
The Fed’s first rate cut in four years, aimed at short-circuiting the economic fallout from the subprime-mortgage crisis, reset the overnight lending rate between banks at 4.75 percent.
Following the move, several large banks immediately dropped their prime rate, the interest rate tied most closely to consumer lending.
The Fed action could eventually translate into lower borrowing costs on adjustable-rate mortgages, home- equity loans, auto loans and credit cards.
The consensus among some local businesses surveyed about the rate cut Tuesday was positive:
The real estate agent
Jon Terry, managing broker of Realty Professionals of America Inc., said he always views a Federal Reserve rate cut as a boost to the housing market, which has been plagued by sluggish home sales and people unable to secure loans.
“I’ve got some buyers waiting around to see what happens with the Fed and what happens with long-term mortgage rates,” Terry said. “When you’ve got a sluggish market and you see the interest rates come down and you know you’ve got buyers watching to see what happens, you hope they’ll jump in and buy up some of the existing inventory.”
The mortgage banker
Stacey Harding, senior vice president of Cherry Creek Mortgage, said the Fed cut is likely to make more money available for mortgages and, as a result, help strengthen a struggling housing market.
“The Fed cut should bolster both consumer and investor confidence as it brings down the cost of borrowing,” Harding said. “It should also bring some strength back to the mortgage market,” particularly loans not backed by agencies such as the Federal Housing Administration.
Harding said people whose mortgages are adjusting may get some relief from higher rates because of the Fed’s move.
The company owner
Classic Doorways owner Aaron Linkow said he expects the residential side of his door-finishing business to pick up in the next six weeks.
“It will probably allow some of our residential builders to have access to bank capital, which has been tightly restricted over the last couple of months,” Linkow said. “It will free up some cash for them to start building again.
“Builders are still a little gun-shy because no one is buying houses. But if the banks start lending more money at a better rate, that will at least help.”
The car dealer
Todd Hilleboe, general manager of Go Courtesy Ford on South Broadway, doesn’t expect to see an impact from the rate cut.
“Most banks aren’t going to adjust on short-term loans for a while,” he said. “Sometimes it’s 30 days; sometimes it’s never. I think it’s going to affect the housing market a lot more than it’s going to affect the car business.”
Staff writer Margaret Jackson can be reached at 303-954-1473 or mjackson@denverpost.com.
This article has been corrected in this online archive. Originally, due to an editing error, it incorrectly described Stacey Harding’s occupation in a headline. He is senior vice president for Cherry Creek Mortgage, which is a mortgage lender.
