So, let me see if I’ve got this right.

The US economy was seen as being in trouble. Investors were fleeing the stock market and turning to safer investments such as US Treasury notes & bonds.

Investors were worried because of the “credit crunch” that was gripping the markets, caused by the “subprime lending crisis” hitting the housing industry. This turn of events threatened the entire US economy, putting it at risk for a recession.

So, the Federal Reserve lowered the “fed funds” rate, which affects mostly short-term interest rates, hoping to loosen up the flow of credit on the open markets.

Which it did.

Money started flowing back out of Treasuries into the stock market. The DJIA has gone up 209 points since the Fed announced its decision on September 18 (in fact, the markets had been assuming a rate drop for several weeks, so much of the 900 point gain since August 31 could be attributed to the Fed move, in my opinion).

So, what happens when investor money goes into the stock market?

Well, in this case, bond market yields went down, while average interest rates went up (finance majors, help me out here with my analysis, I’m writing this very quickly).

(The reason why interest rates increased this time was because the Fed’s move made it cheaper to borrow, short-term, which means companies could take out more loans. Investors fear that because of the cheap cost of money, the economy will be in danger of overheating, causing the rate of inflation to rise and dropping the value of future dollars. Since bonds pay steady rates of income, and since these revenue streams would be worth less, in each upcoming year, because the values would decrease due to the effects of inflation, investors turn to the stock market, instead.)

Which means mortgage loan rates are now higher than they were, just two weeks ago.

Again, the cost of borrowing to purchase a home has gone up.

Thanks, Ben!

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Updated:  1st Q 2018

Author Profile

John Ford
John Ford

Over the course of 20 years in the Boston downtown real estate market, John represented and sold numerous, condominiums, investment and development properties in Greater Boston and in the surrounding suburbs

In addition to representing Boston condo buyers and sellers, John is currently one of the most recognized Boston condo blog writers regarding Boston condominiums and residential real estate markets. John's insights and observations about the Boston condo market have been seen in a wide variety of the most established local & national media outlets including; Banker and Tradesman, Boston Magazine The Boston Globe, The Boston Herald and NewsWeek and Fortune magazine, among others.


For over 24 years, John Ford, of Ford Realty Inc., has been actively involved in the real estate industry. He started his career in commercial real estate with a national firm Spaulding & Slye and quickly realized that he had a passion for residential properties. In 1999, John entered the residential real estate market, and in 2000 John Started his own firm Ford Realty Inc. As a broker, his clients have come to love his fun, vivacious, and friendly attitude. He prides himself on bringing honesty and integrity to the entire home buying and selling process. In addition to helping buyers and sellers, he also works with rental clients. Whether you’re looking to purchase a new Boston condo or rent an apartment, you’ll quickly learn why John has a 97% closing rate.


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John Ford and his staff can be reached at 617-595-3712 or 617-720-5454. Please feel free to stop by John's Boston Beacon Hill office located at 137 Charles Street.

John Ford
Ford Realty Inc
137 Charles Street
Boston, Ma 02114



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