How will the Fed’s rate cut affect my mortgage rate?
dasielady asked:
I have been pre-approved for a mortgage through my credit union. The loan is a 5-year ARM for 80% of the value, and a 5-year Balloon for 17% of the value, and I am putting 3% down on the house. I am set to close 1 week from today. I have a loan commitment from the lender.
I have been pre-approved for a mortgage through my credit union. The loan is a 5-year ARM for 80% of the value, and a 5-year Balloon for 17% of the value, and I am putting 3% down on the house. I am set to close 1 week from today. I have a loan commitment from the lender.
I read in the news today that the FED is considering curring interest rates for the money that banks borrow, (which to my understanding is how they set thier interest rates??) by .25 to .50 %.
If they do cut rates, would that affect a credit union? Should it lower the rate that I am being offered for my home loan? Would I be foolish to ask my lender (credit union) if my rate goes down?
What are your thoughts?
Thanks!
Eleanor
Tags: Balloon, Loan Lender, Money
March 15th, 2009 at 10:49 am
Shawn
Most likely it won’t. The Fed rate isn’t strongly correlated to mortgage rates.
Mortgages are more strongly correlated to T-bill rates, such as the 1-year T-sec. These go up and down depending upon how much money the govt. lends and how many people want to buy our bonds. It’s determined more by China and Saudi Arabia than the fed. The reason for the strong correlation is that mortgages ‘compete’ with T-bills for money. Both are long-term, relatively safe places to earn some interest income.
–>Adam
March 15th, 2009 at 6:47 pm
Corey
It will have no immediate effect and probably no long term affect.
March 18th, 2009 at 4:07 am
Terry
Adjustable rates look real nice…now…(it’s kind of like bait and switch)
March 19th, 2009 at 4:51 pm
Tom
probably wont make that much difference but make sure you are ready to refi in 5 years
March 20th, 2009 at 8:35 am
Charlie
if the fed funds rate is lowered the mtg industry should see a quick effect but probably not in a weeks time
March 21st, 2009 at 10:03 pm
Pamela
ARM’s by definition move with interest indexes (and the Fed’s bench mark interest rate affects these indexes greately). Today the rate was cut by .5% and what that means is that the ARM portion of your monthly mortgage payment should go down in the short to mid-term. But there is no garantee for the future! And that’s why you’re getting a better deal today compared to say a 30 year fixed, you’re sharing the risk along with your credit union…
Now for the 17% ballon, I hope that you have a plan to pay it when it’s due in 5 years. Otherwise, you might be forced to refinance if you have that option or else… Well I guess you heard the news like the rest of us… If I was you, I would make sure that the worse case senario is considered so you don’t end up loosing your home like 45,000 People in Atlanta this year…