The Feds Lower Rates 3/4 of a Percent!

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The Feds Lower Rates 3/4 of a Percent!

January 23rd, 2008 categories: Real Estate Finance

Wow, what a ride! While we were enjoying our Martin Luther King Holiday, Asian and European markets were in a free fall. It turns out that yes, the U.S. economy is still the world’s leading economy. The old adage “when the U.S. sneezes, the world catches a cold” seems to hold true. While some European and Asian countries seemed confident that they were finally independent of our economy, it turns out that with the U.S. flirting with a major recession, their economies suffered right along with ours.

Insert the Federal Reserve. Now the Federal Reserve is not owned by the government. In fact, it is largely owned by 5 large U.S. Banks who in turn have large shareholders from Europe and Asia. As these shareholders saw their own markets tumbling, they began to put pressure on the U.S. Banks to have Feds to step in immediately and make a drastic move to spur the U.S economy.

So, while many of us were enjoying the day off, the Feds held an emergency inter-session meeting and lowered both the Discount Rate and the Feds Fund Rate a whopping .75%. The last time the Feds held an emergency meeting between scheduled meetings was September of 2001.

Mortgage Rates plummeted in response to the Fed’s move. Rates are once again near all time lows. The stock market in turn has proved extremely volatile with huge early losses this morning and a rally midday. Mortgage Rates were re-priced two times today.

Prime is now at 6.5%. Mortgage rates are already so low and the Feds meet again next week. Many feel the Feds will make another cut. There is pressure now for the European Central bank to lower their rates. So far, the Central Bank has held steady. If they do make a move, it will leave the door open for the Feds in turn to lower rates once more next week.

What does this mean to you, the homeowner? Well, it points out that the U.S. economy retains its position as the world’s dominant economy. It also means that rates are so low that now is definitely the time to refinance your current mortgage. If you are on the fence and have been waiting to purchase a home, now is the time.

If the Feds make another move, it will most likely be soon. Real Estate is at, or near the bottom in most areas and there are wonderful opportunities to roll the clock back and purchase a great property at a huge discount.

If you own a home, consult your mortgage broker and evaluate if you could lower your monthly payment by refinancing. If you have an adjustable mortgage consider refinancing to a fixed rate mortgage. If you are looking to purchase a home, do sooner rather than later. You will have a huge tax advantage and can lock in on a fixed rate mortgage in the low 5% range.

As always, I am happy to answer any questions you may have on your current or proposed mortgage.

Lysa Catlin
CMC Finance, Inc.
(858) 456-3000

This entry was posted on Wednesday, January 23rd, 2008 at 11:03 pm and is filed under Real Estate Finance. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

Denny Oh January 23rd, 2008 at 11:08 pm
Are banks still offering 100% financing? How strict are lending conditions now and what should buyers anticipate?
Lysa Catlin January 24th, 2008 at 7:41 am
Yes, there are a few 100% financing programs still available. The lending conditions are very rigid. You must have a good fico score and be able to provide your pay stubs, tax returns, and bank statements to qualify. The biggest issue is the appraised value. The value of the property must be very strong and supported by other comparable sales. With as little as 5% down, the guidelines are more lenient. However, lenders are continually changing their guidelines. Several of the larger banks are now requiring a minimum of 20% down payment. I think many more banks will follow their lead. If you are looking to purchase a home with less than 10% down, I recommend you do so sooner rather than later while those programs are still available at these low, low rates.