How does the federal rate cut affect mortgages?
The Fed has cut rates by 75 basis points. These cuts in the federal funds rate does not neccessarily mean that mortgage rates will go down. Rates may go down after this week’s rate cut, but they also may go up, as they did after the Fed’s rate cuts in January cuts.
It is impossible to know what impact the Federal rate cut will have on mortgage rates, or which direction rates will go. For this reason, buyers are urged not to wait for the Cecil County real estate market to bottom before looking for a mortgage. If you are looking to purchase a Cecil County home now may be a good time to do so since mortgage rates are relatively low.
“I am absolutely a believer that taking action now makes sense,” says Bob Walters, chief economist at Quicken Loans.
It’s anyone’s guess what will happen to mortgage rates. Richard DeKaser, chief economist for National City Corp., is betting the cost of carrying a mortgage won’t be going down substantially any time soon. “We’ve seen the lowest for mortgage rates,” he says. “We’re going to be in the range of 6 percent for the balance of the year.”
According to Darren Corder from Chase who is a local lender for the Cecil County real estate market, ”the Fed dropping the Fed Prime Rate will have virtually ZERO effect on long term interest rates. It’s stocks and bonds that drive our rates/pricing. NOT Fed Rate. The drop in the Fed Rate usually creates a short term RISE in mortgage rates, because stocks go up on good news, bonds go down, and rates go up.”
Here are the average mortgage rates for today according to bankrate.
| NATIONAL OVERNIGHT AVERAGES | TODAY | +/- | LAST WEEK |
| 30 yr fixed mtg | 5.74% | - | 6.07% | |
| 15 yr fixed mtg | 5.09% | - | 5.49% | |
| 5/1 ARM | 5.65% | + | 5.48% | |
| 30 yr fixed jumbo mtg | 7.02% | - | 7.05% | |
| 5/1 jumbo ARM | 6.13% | + | 6.01% |
Source: Bankrate.com
If you are thinking of purchasing a Cecil County home, Don’t make mortgage decisions based on Fed actions, such as this week’s rate cut. ”Trying to time the real estate market is historically a fruitless exercise,” says Bob Walters, chief economist at Quicken Loans. “If it saves you money to convert your ARM or to lower your fixed rate, then by all means do so.”
Filed under: Mortgage info on March 18th, 2008
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