Financing in 60613>Question Details

Russ, Home Buyer in 60613

Federal Reserve to cut interest rates today...

Asked by Russ, 60613 Wed Jan 30, 2008

Based on the speculation of the Fed cutting rates today(we'll see how much shortly...), what is the expected impact to Mortgage rates and to what level? Let's say the Fed cuts interest by 1/2%... what should we expect on the Mortgage rate side?

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Russ,

Short term rates are controlled by the Federal Reserve but longer term rates that influence mortgage rates are driven by the market. The best gauge of what will happen to interest rates today and going forward is to watch the Bond market and particullarly the 10 Year Treasury Note. Having said that, short term events can also impact mortgage rates such as volatility in the stock market. A flight to quality from stocks to bonds pushes up bond prices with yields moving in the opposite direction resulting in lower mortgage rates. It will be interesting to see what happens in the coming days and weeks.
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2 votes Thank Flag Link Wed Jan 30, 2008
Ted is right, impact on mortgage rates probably won't happen for another 3/4/5 months ...

Keep in mind, lenders have been crying poor mouth for the last 6 months, so they need to make some of that up and they need some profit on top of that ... .. what the heck, we're only the consumers for goodness sakes.

;^))
1 vote Thank Flag Link Wed Jan 30, 2008
The last cut didn't do anything.... rates actually went up..
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0 votes Thank Flag Link Mon Feb 11, 2008
Thanks to all for your comments on this today.

Yes, I saw the .5% change and now I just have to wait for some mortgage change, if any. I'd need it lower for my refi to make sense. I'll be keeping my eyes on it for the coming days/weeks. I know the unemployment data should be coming out this Friday and that could have an impact as well (independent of the Fed cut today, but still).

Thanks again for the input today!
0 votes Thank Flag Link Wed Jan 30, 2008
It's official. Fed dropped the Federal Fund Rate today by 1/2%. When the bonds fall, mortgage rates typically go up (see my earlier post). My trusted lender partners tell me that mortgage rates are presently at their lowest in five years. Now may very well be the time to buy before mortgage rates begin to creep upward...
0 votes Thank Flag Link Wed Jan 30, 2008
TED SHOOP, Real Estate Pro in Buford, GA
MVP'08
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Well Russ,
Until now I was thinking .25 point. However I am now thinking a .50 point.

I don`t know what to expect on the Mortgage side. It really can go either way.

If you can lock in a 30 year fixed at or below 5.25% in the next few weeks, take it. With reasonable closing cost.

Talk with you loan officer about how much a .25 on your interest rate ( 5.00% vs. 5.25% ) will actually effect your monthly payment.

Good Luck.
0 votes Thank Flag Link Wed Jan 30, 2008
Mr.P, Other/Just Looking in Arizona
MVP'08
Russ-There typically is not a direct correlation and immediate impact to mortgage rates. There are a lot of other variables and economic influences (like the bond market) that drive mortgage rates either up or down. Historically speaking, rates are currently at the lowest that they've been in well over 2 years.

What a great time to be not only shopping for a great deal on a home but also getting phenomenal terms on financing. Best wishes with your home purchase! - Ted
0 votes Thank Flag Link Wed Jan 30, 2008
TED SHOOP, Real Estate Pro in Buford, GA
MVP'08
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