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

Foreclosure Prevention Help

The federal government and major industry players are taking a hard look at an what seems to be an impending foreclosure tsunami.

A recent announcement by the federal government and participating lenders regarding the formation of a group called "Hope Now" indicates relief may well be on the way. The group, consisting of banks and major lenders will help to improve assistance to troubled mortgagors.

The Mortgage Loan Search Financial Network reports growing use of resources designed to help home owners experiencing mortgage default. The sites located at http://www.bcpl.net/~ibcnet/index-foreclosure.html features step-by-step guides to prevent foreclosure.

The Hope Now alliance is made up of all major mortgage servicers. These servicers handle 60 percent of the mortgages in the U.S. Federally approved credit counseling organizations are an important part of the network. The website is located at www.hopenow.com. Users are helped to ID their servicers (i.e., look on your mortgage statement). Several approved credit counselors are provided along with links to foreclosure information.

Popular Financial Dictionaries Online

This blog will list useful dictionaries, Q&A's and Wiki reference guides as they become available.

Wiki A website or similar online resource which allows users to add and edit content collectively.
www.tvb.org/multiplatform/Multiplatform_Glossary.asp

One of the more popular Wikis is Wikipedia. Wikipedia is a free encyclopedia than can be edited by anyone with access to it. It provides an easy method for linking from one page to another. This is a good place to find extended definitions to difficult financial terms. http://wikipedia.org/

Business Plan Glossary/Dictionary
I must include a dictionary I consider very useful for those putting together a business plan. The Business Plan Dictionary meets my criteria for usability. This dictionary allow you to lookup terms using a search box or scroll down. The terms and definitions are extended where possible to give the user a multi-faceted look at the word in order to better appreciate it. 

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.

Cash Out Refinancing Rates - Good Time To Refinance?

At the present time mortgage rates are steadily going up. What does that spell for those seeking to lower mortgage payments, payoff credit card debt and opt for cash out. That all depends on three factors

1. The type of refinance loan program you choose.
2. Getting a good deal on rates
3. locking in rates on time

So yes it's all about rates and fees. Not so long ago I blogged about home mortgage refinancing vs. home equity loans and how to best deal with mounting debt issues.The issue had to do with the desparate measures people take to deal with defaulting on a car or home loan. Obviously getting financial counseling is one of them. Why? Although learning how to manage money is essential to maintaining or raising the quality of life many choose to get help when it's late in the game instead of getting this vital education and training before the game begins.

Now standing deep in debt homeowners decide to run for help. The fact is depending on the depth of debt, your options may prove much more limited than you realize. That said, when working income is just not there and credit card interest and penalty fees are mounting up more desparate measures are needed to deal with defaulting on a loan.

Home Equity Loan - A Solution?
Many homeowners opt early in the process to take out a home equity loan or home refinance loan. When rates began to decline in November and December there is no wonder why refinance applications went up. But now there is a slightly different reality, at least for the moment. Rates are climbing. What to do?

Cash Out Mortgage Refinance Options
There is always the trusty home equity loan program. But rates on these loans are higher than rates on a home refinance loan with the cash out option. That said refinancing may be your best bet. 

Cash Out Refinancing - A Solution To High Interest Rate Debt

I recently found out that the actual number of homes lost to foreclosure is unknown. The reason is that there is no central database that tracks that number. Deeds that indicate a transfer of ownership are filed in court. I was surprised that know one digitally compiles data even within a city to ascertain true difinitive foreclosure stats. Case in point. Atlanta Georgia listed some six thousand home destined for foreclosure. At least 900 ended up being foreclosed.
What are the common causes of this seeming epidemic of defaulting on a loan?

Identifying Debt Problems and Solutions
Utimatley it has to do with a large number of homeowners existing on low to modest incomes and contending with a volatile loan product, namely adjustable rate mortgages (ARMs), option ARMs and interest-only mortgages. ARM's fluctuate with changes in the market. Monthly payments are likely to go up as interest rates increase. Adjustable rate mortgage programs can only set one up for problems later down the road. What is the solution. In these situations there is no quick fix. Counselors would advise that they enroll in a debt relief program that allow them to work out a low payment deal with creditors including a consolidation program if able.

Cash Out Refinancing Alternatives
The Alternative to this would be home loan refinancing. Cash out or cash back mortgage refinancing allows the homeowner to enter a new mortgage loan program usually going from an adjustable rate program to a longer 15 - 30 year fixed rate program.