If Wall Street gets their way, they will.
Wall Street is pushing for the Federal Reserve to slash interest rates, after the unemployment rate sky rockets to 5% in December. Job growth came in well below forecasts. They predicted 70,000 jobs to be added, and it seems that only 18,000 jobs were added to the Nation's payrolls.
Worries of a recession plaque the nation, as unemployment rises, and the housing market crashes. The President seems to finally be (in a not so upfront way) admitting that the economy is not in such a "strong" state as he has indicated over and over again.
He talks of a tax cut, but one minute it's a tax cut for everyone, and now it seems the talk is aimed at cutting taxes for the middle to upper-middle class. They've even spoke of a "tax rebate", like the one they did right after September 11. (You know, the $300 check they were sending out to people, which I for some reason had to send back). Economists question "where will the money come from" since our National Deficit has reached an astonishing amount of money. During September 11, we had a budget surplus. If they were to do another "tax rebate", it would have to be pulled from another place.
The Fed announced Friday that it was going to lend up to $60 billion to banks, and it would decide by February 1. It seems as though the worries about the recession may have a great effect on the Fed's decision on whether or not to lend the money.
The Dow, S&P, and Nasdaq continue to plunge into negative numbers.
As a result of these gloomy numbers, expectations for a half-point rate cut grew Friday morning. According to futures listed on the Chicago Board of Trade, investors are pricing in a 84 percent chance that the Fed will lower the federal funds rates by 50 basis points (1/2 of a percent), to 3.75 percent, at the conclusion of its two-day meeting on January 30.
With all of the mixed messages, it's hard to tell what will happen. It seems as though our economy is in a very weak state. With the election coming up, it seems as though it makes the politicians take a "closer look" and actually try to do something about it. (Or at least talk about doing something about it, hahaha)
Could this be the beginning of another refi-boom? There have been predictions since November of 2006 about another refi-boom in 2008. Some even more specifically May of 2008.
Rates are already very low now, with the 30 year fixed rate available NOW at 5.5%. The adjustable rates seem to stay higher than the fixed rates for now, making the 30 year fixed rate the most sensible loan product choice for just about any borrower. But I remember when the adjustable rates were below 4%, during the last refi-boom.
Something has to happen to spark the economy, and I'm not sure that tightening up guidelines before allowing people to refinance out of their adjustable rates is going to do it. But hey, I don't work on Wall Street either, so what do I know?
Shawna Marie Ulrich
Senior Loan Officer
(704) 401-1441 NC/SC Cell/Fax
(330) 777-0143 OH Cell/Fax