The Federal Open Market Committee (FOMC) is scheduled to meet again this week and it's predicted that rates will be cut again. It's commonly thought that a cut in interest rates by the FOMC brings with it a decline in home mortgage rates. This is not always true.
If you are considering obtaining a new loan, the time to pick up the phone is now.
Historically, the time to make an application to capture the best rate may be before an FOMC meeting, not after. While it's true that mortgage rates may improve immediately following a rate cut, they can just as quickly get worse. I don’t want you to lose out by playing the waiting game.
Why do home loan rates often decline following rate cuts by the FOMC? The reason is that Fed rate cuts can be seen as inflationary and bond traders hate inflation. And it is the bond market that sets long-term interest rates.
After two recent FOMC meetings, interest rates rose significantly after a rate cut. First when rates were cut in September of 2007 and then again following the inter-session emergency meeting in January 2008. In each case the price of bonds deteriorated quickly and in the span of two days, interest rates increased up to .75% off of their low points.
If you would like to know how you could benefit from refinancing or are in the process of buying a new home, make sure you have your application in process. This way, you can capture the best interest rate when it is available. If you wait, you may cost yourself the best chance to have the lowest rate.
Like I said.....Trust me, when I say "It's Time"Mortgage rates end five-week descentNEW YORK (CNNMoney.com) -- Mortgage rates ended their five-week descent following the Fed's decision to cut its federal funds rate by half of a percentage point, Freddie Mac reported Thursday.
The government-sponsored loan buyer said the rate on a 30-year fixed-rate loan averaged 5.68% for the week ending Thursday, up from 5.48% last week, but still well below its historical average Freddie Mac noted.
At this time
last year, the 30-year fixed-rate mortgage averaged 6.34%, Freddie Mac said.
"Reinforcing the Fed's resolution to thwart a recession, the Federal Open Market Committee announced another cut in the target federal funds rate by half of a percentage point in their most recent scheduled meeting," said Freddie Mac (FRE, Fortune 500) vice president and chief economist Frank Nothaft in statement Thursday.
"This came on the heels of the Fed's rate cut of three-quarters of a percentage point the previous week, and the shaping-up of a fiscal stimulus package by Congress and the White House. This cut was in line with market expectations." he added.
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