It was a busy week of economic news. The headline for the week is of course the FED lowering the Fed Funds rate 0.5% to 1 %, the lowest in quite a long time. The question that is always on everyone's minds: "What does this mean for mortgage rates?" Unfortunately the answer is: Not much! The Fed Funds rate is the shortest of short term rates. It does not have any direct effect on mortgage rates. It was also priced into the credit markets since the move was anticipated. It will immediately lower the prime rate which most Equity lines are tied to.
The credit markets have not been easy to predict in the most recent few months. If you were to look solely at the economic data you would anticipate that Mortgage Rates would be about 1% lower than they are today, but with the turmoil in the market, the Liquidity crunch with the banks, and the fact that the word "mortgage" is still being treated as a 4 letter word, we still have mortgage rates artificially high at the moment. I do see a glimmer of hope here: Immediately after the FED announcement this week, we saw the credit markets sell off. This is a normal market reaction to news. The markets bought into the rumor/guess that the FED would ease, and then sold on the fact. A clear cut case of the typical: "buy the rumor, sell the fact" that we have always seen in the markets. Finally a normal response in a confused market! It could be a sign of settling down. The bailout funds are slowly filtering their way into the banks, and will work to free up liquidity on the corporate and bank to bank lending side of the equation. This return of liquidity can only help to support the markets and help things move forward.
Keep in mind that all through this liquidity crunch we have experienced, mortgage money was always available. We have more than enough money available to lend to prospective buyers, Rates are attractive, Prices are down - A recipe for a great time to buy.
Have a wonderful weekend, and Happy Halloween!
Rob
Robert Rauf
Real Estate Mortgage Network
www.RobertRaufHomeLoans.com
(732)740-0175
;)
;)
Just a quick Re-cap of this weeks biggest news item, over all the market was fairly flat, to slightly positive this week, even with the slew of economic data.
Have a great weekend