Feds Cut Interest Rates 0.75 bps - Good Time To Refinance?

Wednesday, January 25, 2008

Following a December rate cut the Fed acts again to boost a weakening economy and prevent recessionary contagion.

Federal Reserve made history yesterday cutting the interest rate a whopping .75 Bps. This was the fourth interest rate cut in the last few months.

Feds cut rates 75 bps. The biggest cut in 17 years. Homeowners seeking release from ARM's may see this as a good time to refinance.

The New York Times reports, "The reduction in the federal funds rate from 4.25 percent down to 3.5 percent marked the biggest reduction in this target rate for overnight loans on records going back to 1990."


The results? Stocks surged as a result of the news. Loan applications increased and Internet rate hunting activities increased 33% according to Fimark's Refinance Loan Rates resource.

The home mortgage refinance resource resource encourages consumers to negotiate with multiple lenders who are willing to beat or meet other offers. Remember to lock-in attractive rates for as long as it takes to process the loan.

Experts predict the Fed would lower the funds rate to 3 percent by the end of March 2008.

Those with an adjustable rate loan (ARM) or credit card can anticipate a drop in rates in the weeks following a rate cut. Fixed rates are not immediatly affected. Still 15 or 30 year fixed rate loan programs will benefit from improved mortgage lending market and consumers can expect more attractive loan packages.

Those opting for a 15 or 30 year fixed rate loan program may see a savings of up to tens of thousands of dollars with a rate that's just .25% higher.

Fed Prime Drops 0.50%

The Fed Prime Rate drops 0.50%. That's a significant low. Meanwhile, following the release of the September 18th minutes of the Fed's Open Market Committee (FOMC) meeting, financial markets reassessed the likelihood of another rate cut at the upcoming October 31st meeting. The market currently is looking for about a 30 percent chance of a 25 basis point rate cut rather than the 50 percent chance that they had previously expected.

A HomeBuyers Market?
Homebuyers paid 7% or 8% during the mid- to late-'90s, and double-digit rates were the norm throughout the '80s and early '90s. Compare that to todays rates and the talk about rates cuts and it's easy to see why it may still be a homebuyers market.

Can homeowners still save when refinancing? Refinancing savings all depends on when you bought your home and what rates were at the time. Currently homeowners can realize a savings if refinancing rates are 30 or more base points lower that ones current rates.

30 Yr Fix 6.37% 0.03%
15 Yr Fix 6.03% 0.05%
1 Yr ARM 5.58% -0.07%
5/1 ARM 6.11% -0.10%
30 Yr Tres 4.87% 0.10%
Fed Prime 7.75% -0.50%

To find out how much loan you can afford use the refinance calculator at
http://refinanceloanrates.fimark.net

Loan Demand Rises - 5/1 ARM Dips

Demand for loan applications to purchase homes and refinance existing mortgages rose last week. In the week ending October 5, the seasonally adjusted index of home loan application activity increased 2.4% to 652.0, according to the Mortgage Bankers Association. Refinancing requests accounted for 46.2% of total applications last week, up slightly from 46.0% and adjustable-rate mortgages accounted for 13.6% of the total, down from 13.8%.

30 Yr Fix 6.37% 0.03%
15 Yr Fix 6.03% 0.05%
1 Yr ARM 5.58% -0.07%
5/1 ARM 6.11% -0.10%
30 Yr Tres 4.87% 0.10%
Fed Prime 7.75% -0.50%

Refinancing as a share of all mortgage activity increased to 46.2 percent from 46.0 percent the previous week while the ARM share continues to drop, representing only 13.6 of all applications compared to 13.8 percent one week earlier.