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This morning the Federal Reserve made a somewhat surprising move...

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Services for Real Estate Pros with Holzmann & Associates

They announced a 3/4% drop in both the Funding rate and the Discount rate prior to the opening of the market.  And the prognosticators are discussing the possibility that when the Federal Reserve meets for their regular meeting next week, they might drop rates another 0,25% as they wrap up their 2-day meeting.

Whether or not they drop another 1/4%, this is already very good news for borrowers. 

Those that are looking to buy, just got a wonderful late Christmas present (or Hanukkah if you prefer!)  They can get the same home for lower monthly payments.

And those that were considering refinancing, either due to a relatively high current rate, or the prospect of an increase in rate now have even more incentive to move forward and take advantage of the best rates in many years.

Here in East Orlando, there's still the need to have at least 5% equity in the home for most borrowers, but what an opportunity!

So, if you're looking to borrow, what are you waiting for?  If you're a Realtor, what are your buyers waiting for?  NOW is an ideal time to act.

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Chris Pollinger
Berman & Pollinger, LLC. - San Diego, CA
Consulting for Luxury Teams and Brokerages
Fed rate is tied to HELOCs - fixed products are tied to the Treasury Rate and with all the secondary market money dumped in the LIBOR we are seeing an unbalanced yield there.  This will all shake out and I am glad to see the FED taking a recession seriously but don't think it is wise to promote the unmerited perception that mortgage and FED rates are directly tied.
Jan 22, 2008 02:00 PM
David Holzmann
Holzmann & Associates - Mountain View, CA

I don't believe I said the Fed rates were "directly tied" to the mortgage rates.  And, perhaps I will be accused of being ignorant and/or inexperienced, but I have seen a loose correlation between the two. 

In my experience as a Mortgage Broker, and for some time before that, I've noticed that every time the Fed is expected to drop the Funding rate, the lenders anticipate that with a drop in their rates.  Not necessarily an equivalent drop, and not a static drop.  But I have seen some correlation.

Is it any more wise to "promote the unmerited perception" that there is no correlation whatsoever between the mortgage rates and the Fed rates?  Or are you trying to say that there IS absolutely NO correlation?

The truth is, prior to yesterday the mortgage rates were low.  I believe that was in part due to the anticipation of the Fed dropping the Funding rate at the end of the month by the predicted 1/2%. 

Yesterday the Fed made a move that was surprising for two reasons: 1) It was a week early, and 2) It was an extra 1/4%.  Very shortly after that we all saw lenders drop their mortgage rates further - by about 1/8% from where they had been the prior day.

I am not a Lender.  I don't set the Lending rates.  As a Broker, I "just" work with my clients to first find out what their needs and wants are, and then find and negotiate on their behalf for the best loan(s) to meet those needs and wants.  Obviously, there are other factors that Lenders consider in determining their rates as well.  That's why they adjust rates daily, and sometimes multiple times a day.  I have yet to see it, but I can imagine there may be times when those "other factors" outweigh the Fed rates and result in contrary movement.

Jan 22, 2008 10:39 PM
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