Question by JPA: Mortgage Refinancing and Fed Rate Drop?
The Fed is expected to drop interest rates again soon (50 basis points, maybe as much as 75 basis points). How is that likely to affect the mortgage refinance rates (would it be better to wait a few days or to refinance now)? Thanks
Answer by newjerseyguy
New loan rates are not likely to immediately drop very much in response; they aren’t directed tied together. It may affect some ARMs more directly.
Know better? Leave your own answer in the comments!
Just a small heads up. Mortgage rates are always available. It’s the cost connected to each rate that varies from day to day. Sometimes they change more than once a day.
The impending federal funds overnight rate drop would not immediately affect mortgage rates unless the prime rate is also dropped. That would have an effect on any mortgage tied to the prime rate.
Mortgage rates are driven by the US 10 year Treasury Bond yield. When that goes up or down, the mortgage rates often follow suit.
My guess is that rates will dip very little over the next month. If you’re interested in timing the market, you should be closely watching the index mentioned above. And by closely, I mean minute to minute during the market day.
Even doing that, you can’t predict when the mortgage lenders will drop their pricing on their rates.
Most of the Banks have already priced any reduction into the rates. You should be locking your loan NOW.
If rates dip a lot you should be able to get the benefits. The refinance process generally takes between 15-30 days.
Most lenders do not charge you application or lock fees these days. The only fee will be incurred when the appraisal is ordered. If you pay for it it is yours and can be used with any lender.
I wouldn’t do it just yet because it takes awhile for the secondary market to adjust pricing and it doesn’t necessarily happen when the Fed makes a move. In recent years the rates go the way the market is moving. If you’ve noticed recently, the rates have dropped considerably, right along with the market.
The credit writedown info hasn’t all been released yet, and there is more bad news on the way. In addition to that the greatest amount of mortgages slated to adjust is set for Feb. and March of this year.
If I’m doing this I’m looking at Ground Hog day, to see where it’s at. My opinion 2008 will see rates down the entire year. The Fed will pull out all stops to keep the wheels from coming off the wagon. There should be some good deals as a result. Add to that the notion that the “talking heads” have finally caught on that the R word is either here or knocking on the door, and I would wait.
The Fed is not in control of rates. The 10-year bond or LIBOR is what you watch. If you are going to refinance with the same company then call and ask what is the mortgage rates tied to and when do they change the rates (daily, weekly). Then all you have to do is watch the rates as they drop to know when to refinance.
Today the Fed just dropped rates 3/4 of a point. It’s a perfect time to refinance. Go to http://www.MyMortgageSaver.com and have an experienced mortgage broker contact you. You can lock in your rate and lower your monthly payment drastically.