Interest Rates may Drop Lower

The Federal Reserve, in an effort to avoid a recession, surprisingly made an inter-meeting rate cut to the federal funds rate. This latest rate cut left the federal funds rate at 3.5 percent.

The next meeting, on January 29-30, is their formal meeting and it is expected that we may see an additional 0.5 percent rate cut made then.

How will this help you if you are looking to buy a home? The rate cut may help you find a good interest rate that will provide you with a monthly payment you can really afford.

How will this help you if you are facing an adjustment on your ARM loan? Well, it could help you in different ways.

Adjustable loans are based on short term rates which are affected by the fed’s rate cuts therefore when the adjustment on your ARM loan comes due, the rate change may be minimal and the increase in your mortgage payment may not bet so big after all; but then again who wants to keep an adjustable loan when the fixed rate period is over?!

This rate cut could also help you if you are a good candidate for a refinance and you are able to get a much lower rate than the rate on your current ARM loan you got back in 2004 or later.

If you have a HELOC, you will see that you monthly payment may stabilize and may even drop a little.

On the other hand fixed rate mortgages won’t necessarily react to the fed’s rate cut because they are tied to long-term bond yields not short term rates like your adjustable loan but you can still find very good deals on a 30 year fixed mortgage.

January 22nd, 2008 · Filed Under Keeping an Eye on the Market, Mortgage - Loan Information

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One Response to “Interest Rates may Drop Lower”

Federal Reserve Rate cuts: How Will It Impact You and Your Money? : San Jose-Santa Clara County Real Estate UNCENSORED on September 12th, 2008 2:05 PM

[...] I mentioned it on the “Interest Rates may Drop Lower” post, fixed rate mortgage rates don’t necessarily react positively to the fed’s rate cuts [...]

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