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This week, the Federal Reserve cut its target for the federal funds rate by a quarter-point, from 2.25 percent to 2 percent. The prime rate will fall by a quarter-point, from 5.25 percent to 5 percent. The move spells good news to people who borrow money on loans, such as home equity lines of credit, which are linked to the prime rate. Potential home buyers may want to take advantage of this now, because The Fed may take a break from rate cuts for a while. Economists think the Fed may be inclined to leave rates alone, possibly through the rest of 2008, maybe into next year.
Do Fed cuts help mortgage rates? The answer is no … a nd yes. The Fed lowers rates to help stimulate the economy. Ultimately a healthy economy is good for the real estate market. Jesse Lehn, Senior Vice President for Mortgage Investors Group, believes, “ ... a liquid real estate market is beneficial for the mortgage market and that keeps rates competitive.” So, when the Fed lowers bank rates, it can indirectly help mortgage rates, but there is no direct correlation. Long-term mortgage rates are mostly tied to the 10-year Treasury yield, which is determined by bond traders worldwide.
More help for stocks could also be coming from the Federal Reserve cut. In a Business Week article entitled, “Stocks. Ready for Better Times?” by Ben Steverman, William Rutherford, president of Rutherford Investment Management is quoted, saying that the Fed’s move could further ease worries in the stock market, which could help strengthen the U.S. dollar and lower commodity prices.
According to TheTeam@Elich.com associate broker, Paula Parker, “Positive changes in monetary and/or economic policy have a strong influence on the resort real estate market, because a majority of our buyers tend to think of their mountain homes as both retreat and investment. Confidence in the Fed leads to confidence in the stock market and that translates to confidence in the real estate market.”
A common misconception is that mortgage rates change in direct relation to Fed cuts. In actuality, most mortgage rate changes occur regardless of whether the Fed is actually meeting. That’s because the mortgage market anticipates what the Fed is going to do, so mortgage rates often change (up or down) ahead of Fed decisions. Most economists are advising people to stick to the basics if thinking of refinancing or planning to buy a home.
Here is some information every buyer should know when buying or refinancing an existing home loan.
Credit score — As with any financial move, it’s always important to know your credit score. Your credit score will indicate to the lenders how likely you are to repay the loan and to do so in a timely manner.
Loan term — The amount of time you have to repay your loan can directly impact your interest rates. In many cases the longer it takes you to pay off your loan the higher the interest. Likewise, a shorter repayment period can offer you lower interest rates.
Type of rate — Is your interest rate a floating one that can change over time or is it locked in? Both can be beneficial or potentially harmful for different reasons, making this something to consider carefully before you commit to a particular mortgage plan.
Watch the rates — Mortgage refinancing should help the homeowner by reducing monthly payments. In order for this to benefit you, the interest rate should be lower than your initial rate. Interest rates can change often so it’s in your best interest to pay attention to any drops in the interest rate. Periods of sustained decreased interest rates will be the best time to refinance your home; however, carefully consider length of ownership before making changes.
For excellent mortgage advice, contact First Resort Lending. Mortgage loan specialists, Joan Jardon and Val McComb provide top knotch service as well as a variety of loan products not available elsewhere. First time or local homebuyers benefit from First Resort Lending, thanks to local underwriting and superior service. E-mail Joan, joan.jardon@efirstbank.com or Val, valerie.mccomb@efirstbank.com today.
<i>Welcome Home! is compiled using various industry sources by TheTeam@Elich.com. Butch Elich had been helping people with their real estate needs in Summit County for over 20 years. His team includes associate broker, Paula Parker, a Summit resident for 23 years, and assistant, Laura Combrink, an avid mountain enthusiast. Find them on the web at www.elich.com, or at RE/MAX Properties of the Summit, 305 Main St., Frisco.</i>
Do Fed cuts help mortgage rates? The answer is no … a nd yes. The Fed lowers rates to help stimulate the economy. Ultimately a healthy economy is good for the real estate market. Jesse Lehn, Senior Vice President for Mortgage Investors Group, believes, “ ... a liquid real estate market is beneficial for the mortgage market and that keeps rates competitive.” So, when the Fed lowers bank rates, it can indirectly help mortgage rates, but there is no direct correlation. Long-term mortgage rates are mostly tied to the 10-year Treasury yield, which is determined by bond traders worldwide.
More help for stocks could also be coming from the Federal Reserve cut. In a Business Week article entitled, “Stocks. Ready for Better Times?” by Ben Steverman, William Rutherford, president of Rutherford Investment Management is quoted, saying that the Fed’s move could further ease worries in the stock market, which could help strengthen the U.S. dollar and lower commodity prices.
According to TheTeam@Elich.com associate broker, Paula Parker, “Positive changes in monetary and/or economic policy have a strong influence on the resort real estate market, because a majority of our buyers tend to think of their mountain homes as both retreat and investment. Confidence in the Fed leads to confidence in the stock market and that translates to confidence in the real estate market.”
A common misconception is that mortgage rates change in direct relation to Fed cuts. In actuality, most mortgage rate changes occur regardless of whether the Fed is actually meeting. That’s because the mortgage market anticipates what the Fed is going to do, so mortgage rates often change (up or down) ahead of Fed decisions. Most economists are advising people to stick to the basics if thinking of refinancing or planning to buy a home.
Here is some information every buyer should know when buying or refinancing an existing home loan.
Credit score — As with any financial move, it’s always important to know your credit score. Your credit score will indicate to the lenders how likely you are to repay the loan and to do so in a timely manner.
Loan term — The amount of time you have to repay your loan can directly impact your interest rates. In many cases the longer it takes you to pay off your loan the higher the interest. Likewise, a shorter repayment period can offer you lower interest rates.
Type of rate — Is your interest rate a floating one that can change over time or is it locked in? Both can be beneficial or potentially harmful for different reasons, making this something to consider carefully before you commit to a particular mortgage plan.
Watch the rates — Mortgage refinancing should help the homeowner by reducing monthly payments. In order for this to benefit you, the interest rate should be lower than your initial rate. Interest rates can change often so it’s in your best interest to pay attention to any drops in the interest rate. Periods of sustained decreased interest rates will be the best time to refinance your home; however, carefully consider length of ownership before making changes.
For excellent mortgage advice, contact First Resort Lending. Mortgage loan specialists, Joan Jardon and Val McComb provide top knotch service as well as a variety of loan products not available elsewhere. First time or local homebuyers benefit from First Resort Lending, thanks to local underwriting and superior service. E-mail Joan, joan.jardon@efirstbank.com or Val, valerie.mccomb@efirstbank.com today.
<i>Welcome Home! is compiled using various industry sources by TheTeam@Elich.com. Butch Elich had been helping people with their real estate needs in Summit County for over 20 years. His team includes associate broker, Paula Parker, a Summit resident for 23 years, and assistant, Laura Combrink, an avid mountain enthusiast. Find them on the web at www.elich.com, or at RE/MAX Properties of the Summit, 305 Main St., Frisco.</i>
