Any move by the Fed is not likely to have any positive effect on mortgage rates, as Fed Funds rate has NO impact on long term mtg rates. Conversely, if the FED would happen to raise rates, which I personally do not see happening, the mortgage mkt would react negatively.
Sooooo, the FED isn’t going to do much to help you, but could hurt you, so, as you have already realized, the best thing to do is lock-in at these already respectable rates of 6.75 to 7% on mtg rates. This should be enough incentive, considering you are now at 8.75%. Seize this opportunity before it is too late.
The next FOMC meeting is on 6/27. The Federal Funds rate is already at 4%, yet the market is hoping for further cuts due to lackluster earnings.
I’m considering refinancing my personal residence, which was traditionally bought, with a 30 year fixed rate. I think it’s at 8.75%.
Since long term rates, such as mortgages, tend to be predictive, my thoughts are this. If the Fed does not cut rates as the market hopes, or perhaps even not at all, could that not spike a rate hike in long term rates, going from the perception that we have hit the floor?
I’m asking because I’m thinking I should probably lock in the rate on my refinance now, before the FOMC meeting. I’m thinking that, with rates so low, the market may not get the cut it is hoping for. And thus, long term rates may actually go UP, even if the Fed makes a quarter-point cut.
My .02: Wait a couple months. While mortgage rates are good now, IMHO factors are at work now to push them even lower. As a TANKING economy becomes evident, (it is not fully discounted by the markets yet) and with inflation expectations falling there is a real good chance that rates will drop some more.
I agree with the others. The Fed’s short term rate changes don’t have much effect on long term mortgage rates. I would refi now and lock into a nice 6.75% to 7% mortgage.
Re: Have rates bottomed out? - Posted by Jim Locker
Posted by Jim Locker on June 22, 2001 at 09:56:49:
If you are at 8.75% then you should refi anyway.
Long term rates are driven more by perception of future inflation prospects than anything that the fed does directly. Presently, the overall perception is that inflation is not a risk in the economy. Also, the gov’t continues to show a budget surplus - which removes the gov’t from the marketplace as a competitor for funds - which also helps reduce rates.
Personally, I doubt that we have bottomed yet. But even so since you can save over 1 1/2 points, you ought to do it. You can always refi again later if rates drop further.