FED Cuts Key Rate by Quarter Point
Scrambling to shore up the faltering economy, the Federal Reserve cut interest rates to the lowest point in nearly four years at 2 percent. The Fed move will only affect the Prime Rate, which in turn will hit Home Equity Line of Credit Rates. Some of those are starting to bounce along interest rate "floors" already. Since the FED cuts only affect short term lending rates, the only thing which would cause a meaningful downturn in mortgage rates would be a sudden demand by investors. This may not be the case at the present time and lenders are busy building up their loan-loss reserves. We would also take a splurge in investment by Fannie or Freddie, both of which have the cash to buy loans and a place to park them.
The key to near term mortgage rates is inflation. From today's FOMC FED statement "Although readings on core inflation have improved somewhat, energy and other commodity prices have increased, and some indicators of inflation expectations have risen in recent months. The Committee expects inflation to moderate in coming quarters, reflecting a projected leveling-out of energy and other commodity prices and an easing of pressures on resource utilization. Still, uncertainty about the inflation outlook remains high. It will be necessary to continue to monitor inflation developments carefully." I guess this says it all...LOL.
The economy crawled ahead at a pace of just 0.6 percent from January through March as housing and credit problems forced people and businesses to hunker down. Job losses for the first three months of the year neared the staggering quarter-million mark, and a government report on Friday is expected to show that employers shed jobs again in April.
Amidst all the doom and gloom in the economy, the fact remains that mortgage rates are still near all time lows, so there is something to smile about. I don't think we will see dramatic economic improvement this quarter, but hopefully the previous FED cuts, coupled with the economic stimulus program will help nudge the economy toward recovery in the 3rd and 4th quarters. As the lenders are stockpiling loan loss reserves, all will be ready to jump into the housing and refinance markets once home values level out. Cheers!
Refinance Tool Box
The key to near term mortgage rates is inflation. From today's FOMC FED statement "Although readings on core inflation have improved somewhat, energy and other commodity prices have increased, and some indicators of inflation expectations have risen in recent months. The Committee expects inflation to moderate in coming quarters, reflecting a projected leveling-out of energy and other commodity prices and an easing of pressures on resource utilization. Still, uncertainty about the inflation outlook remains high. It will be necessary to continue to monitor inflation developments carefully." I guess this says it all...LOL.
The economy crawled ahead at a pace of just 0.6 percent from January through March as housing and credit problems forced people and businesses to hunker down. Job losses for the first three months of the year neared the staggering quarter-million mark, and a government report on Friday is expected to show that employers shed jobs again in April.
Amidst all the doom and gloom in the economy, the fact remains that mortgage rates are still near all time lows, so there is something to smile about. I don't think we will see dramatic economic improvement this quarter, but hopefully the previous FED cuts, coupled with the economic stimulus program will help nudge the economy toward recovery in the 3rd and 4th quarters. As the lenders are stockpiling loan loss reserves, all will be ready to jump into the housing and refinance markets once home values level out. Cheers!
Refinance Tool Box
posted by Jim Bisnett at
6:10 PM
0 Comments:
Post a Comment
<< Home