Lowered Rates may Rise

Real Estate Agent with QUEST REALTY SERVICES

Last week the Federal Reserve lowered interest rates for the third straight meeting of the FOMC. What does this mean? Well, if you're looking to capture the best home loan rates, you need to act now. For those with an application already in process, you should probably lock your rate as soon as possible. And, for anyone who has yet to begin a loan application, what are you waiting for?

Despite this latest cut from the Fed, rates for many borrowers could actually increase soon. Fannie Mae and Freddie Mac have recently announced 2008 Loan Level Price Adjustments (LLPAs) that are already starting to show up on lenders' rate sheets. LLPAs are automatic "penalties" based on credit scores, which tack on costs in the form of points or higher rates for most anyone with a FICO less than 720.

Since September 18th, the Federal Funds Rate has gone down 100 basis points. If you have a loan that is tied to the Prime Rate, this means your rates have been lowered a full point. But, for those seeking to obtain new financing, you must act now to take advantage.

Following each of the last two interest rate cuts by the Fed, home loan rates jumped higher a couple of weeks later. Remember, lower short-term rates are inflationary by nature, and cause consumers to spend more money. Because of this, long-term rates tend to increase as bond holders hate inflation and command higher rates as a result in order to protect their investments.

Because of these pressures and the upcoming Loan Level Price Adjustments, interest rates are most likely going to rise.

Comments (2)

Linda Scanlan
A Fan of AR - Burleson, TX
Armando - I think the feds just cut the rate as a bandaid to get us through the Christmas season. The rates are going to go up. It's almost a given
Dec 18, 2007 11:00 AM
Armando Rodriguez
Orlando Homes 4 Sale, Real Estate Broker-GRI

Linda~ I'm with you on that one. A bandaid where sutures are needed!

thanks for your comment!

Dec 18, 2007 11:20 AM

What's the reason you're reporting this blog entry?

Are you sure you want to report this blog entry as spam?