Rate cut good news for businesses, area experts say
By Anessa Myers
Published in News on January 22, 2008 1:46 PM
Dramatic rate cuts in key interest rates by the Federal Reserve today boosted the spirits of Goldsboro businesses, which said the moves should convince consumers to take advantage of the lower rates to buy homes, vehicles and other items.
The discount rate, the rate that banks pay to borrow money from the Central Bank, was lowered to 4 percent from 4.75 percent. The federal funds rate, which affects credit card debt, home equity lines of credit and automobile loans, was cut from 4.25 percent to 3.5 percent.
Bankers contacted this morning said that they are happy with the rate cuts. It will allow them to pass the cuts on to their customers, they said.
"A decrease in the rates should have a decreasing effort on the mortgage rates on the fixed market," said Doyle Thigpen, the chief financial officer for all six Little Bank locations in eastern North Carolina. "It would be my expectation that that would have a positive effect for the mortgage consumer because we would expect the prime rate to drop."
Normally, Thigpen said, the prime rate -- the rate that banks charge on variable rate loans -- would drop by the same rate as the Fed rate.
"We expect the prime rate to drop over the next couple of days," Thigpen said.
Whether the new rates will boost home buying will depend on other factors such as the housing and the job market, but the Fed's intent was to stimulate the economy, and that's what Thigpen said he believes will happen.
People considering buying a home or new car will most likely soon see a lower interest rate.
Real estate agents foresee the housing market to increase with the rate change.
Nancy Keck, owner and broker of Houser Associates Real Estate Inc., said the Fed's actions will only improve an already stable Goldsboro housing market.
"First of all, Goldsboro and Wayne County hasn't really had a housing bubble to burst because we didn't have a bubble in the first place," she said. "Houser had our best year ever this year, and the rate can only help."
Ms. Keck said she had hoped the Fed would have dropped the rate sooner in expectation of the economy's well-being, but the slash in the rates is "better late than never," she said.
"It's here, and it should make our market, which is still good, better," Ms. Keck said. "Real estate is a local market, so all these national headlines about the decrease in the housing market really has nothing to do with Goldsboro."
Developers in the area are hoping to see an increase in projects as well.
With more and more people jumping on the rate drop, an increase in homes, new or older, is expected.
And as the demand for new homes is up, the supply has to keep up, pushing developers to boost their building efforts.
For Downtown Goldsboro Development Corp. Director Julie Thompson, the Fed's decision is music to her ears.
The rate change will "certainly make it easier for us to sell the new homes, the Self-Help homes" on South John Street, she said.
The rate-cut should also give car and truck sales a jump start.
Dave Tocheny, general sales manager at Chevrolet Cadillac of Goldsboro, said the interest-rate cut should boost car sales by making it easier for potential car buyers feel better about making a decision.
"I think it will put people in lot safer frame of mind," he said. "It should free up everyone's mind a little.