So, the Fed has 'cut the rates' - twice no less - what exactly does that mean to those of us who have/want mortgages?
The Fed cuts the rates that allow banks to borrow from each other and also to borrow from the Federal Reserve. Unless you have a Home Equity Line of Credit - the 'Fed Rates' don't actually have much to do with the interest rate we, as borrowers, deal with.
If banks can borrow money at a decent rate then they can extend credit to the rest of us for a decent rate. Otherwise the interest rates we would have to pay for our mortgages would be higher since the bank themselves couldn't borrow the money in the first place for a good rate.
Kind of a trickle down - or up - effect.
The Federal Reserve's latest rate cut does not guarantee that rates will keep dropping.
In fact, mortgage rates often climb following a cut in the federal funds rate, and actually rose about 50 basis points after the Federal Reserve announced its emergency 75-basis-point cut Jan. 22.
'The Federal Reserve just lowered interest rates by three-quarters of a point and yet we saw one of the biggest one-day increases in mortgage rates that we've seen in 10 years,' says Bob Walters,
chief economist of Quicken Loans.
'It shows you that there isn't a correlation to the federal funds rate when it comes to mortgage rates,' he says. 'It also shows you how quickly things can change.'
It's impossible to guess where mortgage rates are headed after a federal funds rate cut. Trying to guess when -- or even if -- already attractive rates will fall further is a fool's game. Instead, lock in your rate now.
Please contact me to see if you are in a position to refinance or if you know ANYONE who is renting and does not have a house to sell - NOW is the time to buy.
This time IS going to pass and you wouldn't want to be left on the sidelines saying 'I wish I had taken advantage of the once-in-a-lifetime-opportunity to buy a house when I could get an amazing deal with a super low rate'.
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