Considering how volatile the Mortgage Business is today, now more than ever, it is important for people to deal with reputable mortgage specialists when arranging financing. Take the much-publicized rate cut by the Fed last week for example. The
Federal Reserve lowered short-term interest rates by half a percentage point, to 4.75%, in order to combat the effects of a weaker housing market and tighter credit on the economy. While consumers should start to feel the impact in the form of lower borrowing costs, it is not the
magic pill that is going to solve the mortgage worries. In fact, rates are creeping up to 6.5% this week for a standard 30 year. So what does it mean for the consumer?
First the Lucky Ones: 1: Borrowers holding loans tied to U.S. banks prime rate: Many banks cut their prime rates by half a percentage point after the Fed move. People with loans tied to this rate should see relief soon. 2: Borrowers with home-equity lines of credit: Savings could start next month. You should see better rates if you are in the market for a new fixed-rate home-equity loan. 3: Credit Card customers: Should soon see some relief. About 85% of all credit cards carry variable rates. Holders of these cards will see a benefit only if their current rate exceeds any floors established by the issuers, typically around 14% to 15%, below which their rates can't fall.
The Unlucky Ones: 1: Most of the Adjustable Rate Mortgage holders: Most of these notes are tied to the London Interbank offered rate, Libor, which rose higher than the Fed rate because of the credit crunch in the markets. 2: Savers: Savers could soon see lower payouts on their savings accounts, CD's and money-market mutual funds.
This week's Real Estate Insight: Examine your current mortgage contract and future loan agreements carefully. If you have an ARM or are considering one, know the underlying index your rate is tied to, when the mortgage will reset or shift to adjustable payments and what the margin is.
