Federal Funds Rate Drop Half Percent
In a move that is sure to help the commercial real estate market, the central bank policymakers slashed the target federal funds rate from 5.25% to 4.75%. Amid worries of a weakening economy, and increasing credit problems the move was made to not only improve confidence in the economy but give a little relief to the subprime mortgage crisis.
That’s great news for us in Florida as our rising tax and insurance costs have been making many properties out of reach for the traditional investor to purchase. What does this mean to your overall bottom line? For example if you were considering purchase of a $1,500,000 commercial building through a local bank or funding source at a 6.75% rate amortized over 25 years your monthly debt service would have been roughly $10,363 per month. Now thanks to the rate cut you can most likely get the same loan for .5 basis points less at 6.25% lowering your monthly debt service to $9,895. This puts approximately $468 in your pocket each month for reserves, repairs, etc.
Its nice to see a bit of good news for a change.
