Dear Friends,
For the first time in more than four years, the Federal Reserve cut its Fed Funds Rate, which directly impacts millions of American borrowers. And while this important decision has many implications, there's still some debate among experts about what this means to the economy as a whole.
The Federal Reserve meets again in six weeks, and no one is certain how market volatility and inflation concerns will affect their future policy and decision−making. Bottom line: Take advantage of this opportunity while you still can.
- If your clients are looking to capture a lower interest rate for refinancing or buying a home, this could be the best opportunity to do so.
- If your clients have an Adjustable Rate Mortgage, while this rate cut might help to improve the situation, now is the time to refinance into a fixed−rate loan.
- If your clients have a Home Equity Line of Credit (HELOC) or credit cards tied to the Prime Rate, the Fed's cut in the Fed Funds Rate just put a little money in your clients pocket.
Borrowers waiting for a lower fixed−rate mortgage may be waiting for a long time. The chart below clearly shows how Fed Funds Rate cuts do not translate into cuts in fixed−rate mortgages. In January 2001, the Fed Funds Rate was at 6% and 30−year fixed rates averaged 7.03%. By December 2001, following 4.25% in cuts throughout the year, home loan rates were actually up to 7.07%
Yes, we may experience some temporary improvements in rates in the coming weeks, but the markets will remain volatile as long as inflation and recession are a possible threat to the Federal Reserve's long−term economic policies.
Your Trusted Advisor For Life
Jeffrey Stanton
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