Fed cuts interest rates to lowest level in 4 years

Attached is a link to an AP news article describing the Fed's latest .25 point rate cut. While this is good news for your credit card debt, car and boat loans and maybe even your Home Equity Line of Credit (HELOC) it is not neccessarily going to lower mortgage rates per se.  Mortgages are tied to rates like 10 Year Treasury Bills and ARMS are tied to things like the London Inter Bank Rate (LIBOR) and they are not lock step effected by the Fed funds rate.  So while the Fed cut rates yesterday a 30 year fixed rate mortgage was about 5.8% prior to the Fed announcement and lo and behold today the 30 year rate is......the very same 5.8%

Still any break in interest rates is welcome relief. The Fed is now "cautious" about inflation and so may not lower rates further. I would say with what is going on with the price of oil continuing to rise and with ALL that does to prices - I'd say the inflation fear is VERY well founded!

Here's a link to the article:

http://www.floridarealtors.org/NewsAndEvents/n4-050108.cfm

- Mike W.

Below is reprint of  a Washington Post Article from today announcing today's additional half point rate cut. While I believe this is additional good news for Real Estate and a step in the right direction do keep in mind that this does not instantly translate to lower mortgage rates as most mortgages are tied to the LIBOR (London Interbank Rate  - the rate banks charge each other for short term money) or they are tied to things like 10 Year Treasury Bills (T-Bills) so having the rate drop IS an indication of the government trying to inject money (credit) into the system but if you are currently locked into a rate in anticipation of closing on a NEW loan - you might ask about resetting before closing.

- Mike W.

For the first time in more than four years, the Federal Reserve has made it cheaper to borrow, and by an unexpectedly big margin. See article: www.bankrate.com/brm/news/fed/main-Sept2007.asp

I guess it took a near meltdown of the housing market and a real meltdown in the mortgage business for the Fed to FINALLY stop raising rates or holding them steady. All this fear on the Fed's part of inflation which might be fueled by things like rising fuel prices OUGHT to be offset by the decrease in home values, purchase price and the decrease in consumer confidence as folks in most of the US no longer feel "house rich".

Do read through the Bankrate article as it explains that not every decrease in the fed rate maps dollar for dollar back to lower mortgage rates but I predict this one is going to and pretty quickly - the whole industry - housing AND banking - needs the jump start.

By the way - if you're sitting on the fence about BUYING or REFINANCING. Get off the fence. If the economy shows ANY inflationary signs - look out - these low rates could go away quickly. In an interview promoting his new book Alan Greenspan's crystal ball outlooks much HIGHER interest rates going forward. So get out of that ugly ARM loan now and/or take the plunge on some of the real bargains out there right now.   Ann and I are blown away at what you can buy here now  - particularly on the water...