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Intermeeting Surprise Fed Rate Cut

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Mortgage and Lending with Jay Epstein State Farm Insurance

In a surprise move this morning, the Federal Reserve lowered the Fed Funds Rate by .75% to 3.50%. This move was prompted by an emergency meeting last night as global equity markets sold off significantly due to foreign investors' fears of a US recession.  It is very interesting to note that this morning's Fed cut was the first intermeeting Fed action since September 16, 2001 and the deepest one day cut since 1984. 

While many believe that a cut to the Fed Funds Rate results in an immediate decrease to mortgage rates, this is not true. In fact, on several occasions in the past, a cut to the Fed Funds Rate resulted in mortgage rates going higher in following weeks.  However, we are in uncharted waters now and turmoil and market panic are impossible to predict and do not necessarily follow the rules of history.

Currently we are enjoying mortgage rates at three-year lows, and we have actually seen rates improve already this morning, mostly due to the early morning US stock sell-off.  Additionally, the LIBOR which was at 5.15% just a few weeks ago is now at 3.71%.   In this sea of fear, here is some good news for the housing industry.   

The bottom line is that if you have been considering a refinance or purchase lately, now is a good time to get the process started.