How do the results of the Federal Reserve meeting affect me?
Federal Reserve Update
June 2008
Q: What is the Federal Reserve doing and how does it affect me?
A: Taking a break from its aggressive rate-cutting policy, the Federal Reserve chose not to alter key interest rates during its regularly scheduled meeting at the end of June. The Fed Funds rate now remains at 2.00%.
Since last September, the Fed has cut rates seven times for a total of 3.25%. However, many experts believe that the Fed's decision in June, along with comments from the meeting itself, indicate an increased concern over inflation. This means the Fed could start increasing rates as early as its next meeting, which takes place in August.
The Fed is in a quandary. The economy has slowed, led by a decline in home sales and rising inflation, stemming primarily from increasing energy prices. The Fed's primary role in relation to the economy is to combat inflation and preserve economic growth. To combat inflation, the Fed will ultimately have to increase interest rates in coming months.
What does it mean to you?
If you're looking to buy a house, consider these key points:
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Home prices in some areas are at five-year lows, while personal incomes in that same period have increased. Homes are more affordable for many right now, particularly first-time home buyers.
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Sellers are extremely motivated and many buyers in our area have benefited from the unbelievable deals that exist today.
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Experts foresee a strong rebound in home prices when the economy begins to recover, according to a new report from the Joint Center for Housing Studies. That means buyers today will be sitting on valuable properties tomorrow. Remember, annualized appreciation for homes exceeded 6.35% from 1940 to 2000.
Housing booms follow housing busts – and the savvy buyers aren't afraid to jump into a tough market. But these savvy buyers know that homeownership is a long-term investment. Call me to discuss these points and get your purchase strategy on track. Ultimately, population growth and demographics point to a stronger housing market in coming years.
Even if you're not looking to purchase a home, opportunities still exist. With the Fed taking a breather, this doesn't mean you should be taking a break. It's never been more important to create a financial plan that makes the most sense to you and your family's long-term goals. Call Marc today at 775.833.1014.
Federal Reserve Update
March 2008
It was another eventful month with the Federal Reserve. In a surprise meeting on Sunday, March 16, 2008, the Fed cut the Discount Rate by .25%, lowering it to 3.25%. The Discount Rate is the rate member banks can borrow directly from the Federal Reserve. The rate change on Sunday marks the first weekend change in borrowing costs since 1979.
The Fed met again on Tuesday, March 18, 2008 for a regularly scheduled meeting and announced an additional Discount Rate reduction of .75%, bringing the rate to 2.5%. The meeting also produced a .75% rate cut to the Fed Funds rate, bringing the overnight bank lending rate to 2.25%.
With the Fed Funds Rate cut, borrowers will see a lower Prime Interest Rate, which is used as a point of reference to establish interest rates for banks and lending institutions. Many Adjustable Rate Mortgages (ARMs), Home Equity Lines of Credit (HELOCs), and some Credit Cards are tied to indexes that are sensitive to short term interest rate reductions. Many borrowers in these types of loans will continue to save money due to the cumulative effects of recent rate cuts.
As I have mentioned before, it is important to remember that mortgage rates are tied to long-term bond yields. Therefore, the outlook for the economy and inflation will impact fixed mortgage rates more than Tuesday’s rate cut. However, long-term rates are currently experiencing historical lows. Borrowers considering a home purchase or refinance should take this opportunity to capture a lower interest rate.
Please feel free to contact me with any questions. As a local mortgage professional with a financial planning background, I have the knowledge and resources to help you navigate through these turbulent times.
Federal Reserve Intermeeting Update
January 2008
What a month! In a surprise move January 22, 2008, the Fed cut the Fed Funds Rate by .75%, lowering it to 3.50%. This Fed cut was the first intermeeting Fed action since September 17, 2001, and the deepest one day Fed Cut since 1984. In addition to cutting the Fed Funds Rate, the Fed also cut the Discount Rate, the rate member banks can borrow directly from the Federal Reserve, to 4.0%. This move should provide further stimulus to the credit markets.
The following week, the Fed met again for their regularly scheduled meeting, announcing a widely anticipated rate cut of .50%. This rate reduction brings the Fed Funds Rate to 3%. Another rate cut is expected in the next meeting as well. With inflation still a concern, it will be interesting to see how this plays into the equation.
As I have mentioned before, it is important to remember that mortgage rates are tied to long-term bond yields. Therefore, the outlook for the economy and inflation will impact fixed mortgage rates more than January’s rate cuts.
It is not uncommon for mortgage rates to drop in anticipation of a Fed rate cute announcement. However, after the initial drop, mortgage rates can rise significantly in the following days. So, if you are considering a purchase or refinance, although counterintuitive, now may be the best time to lock in your rate as we could see higher mortgage rates after the next Federal Reserve meeting.
Please feel free to contact me with any questions. As an Incline Village mortgage professional with a financial planning background, I have the knowledge and resources to help you navigate through these turbulent times.
Federal Reserve Update
December 2007
In an effort to stimulate the economy, the Federal Reserve cut rates for the third consecutive time on December 11, 2007. The Fed Funds Rate was reduced by a quarter percentage point to 4.25%. The discount rate, which is what banks pay to borrow directly from the Fed, was also reduced by a quarter percentage point to 4.75%.
With this news, borrowers will see a lower Prime Interest Rate, which is used as a point of reference to establish interest rates for banks and lending institutions. Many Adjustable Rate Mortgages (ARMs), Home Equity Lines of Credit (HELOCs), and some Credit Cards are tied to indexes that are sensitive to short term interest rate reductions. Many borrowers in these types of loans will continue to save money due to the cumulative effects of recent rate cuts.
Although long-term mortgage rates will not experience much movement from Tuesday’s Federal Reserve decision, long-term rates are currently experiencing historical lows. Borrowers considering a home purchase or refinance should take this opportunity to capture a lower interest rate.
No one can predict with certainty how market volatility and inflation concerns will affect the decision-making of the Federal Reserve in 2008. Consult with a professional Mortgage Planner to see how the recent Fed Funds Rate reduction might benefit you. Call Marc today at 775.833.1014.
Federal Reserve Update
October 2007
On October 31st, the Federal Reserve reduced the Fed Funds Rate by a quarter percentage point to 4.5%. The rate cut was the second consecutive reduction following the half percentage point cut in September and will directly impact millions of American borrowers.
With this news, borrowers will see an even lower Prime Interest Rate, which is used as a point of reference to establish interest rates for banks and lending institutions. Many Adjustable Rate Mortgages (ARMs), Home Equity Lines of Credit (HELOCs), and some Credit Cards are tied to indexes that are sensitive to short term interest rate reductions. Many borrowers in these types of loans will immediately start saving money because of this rate cut.
No one can predict with certainty how market volatility and inflation concerns will affect the future policy and decision-making of the Federal Reserve. With the next Fed meeting scheduled for December 11, 2007, borrowers should take advantage of Wednesday’s rate cut. If you are considering a home purchase or refinance, now is the time to capture a lower interest rate. Consult with a professional Mortgage Planner to see how the Fed Funds Rate reduction might benefit you. Call Marc today at 775.833.1014.
Federal Reserve Update
September 2007
On Tuesday, the Federal Reserve reduced the Fed Funds Rate by a half percentage point to 4.75%. The rate cut was the first since June 2003 and will directly impact millions of American borrowers.
With this news, borrowers will see a lower Prime Interest Rate, which is used as a point of reference to establish interest rates for banks and lending institutions. Many Adjustable Rate Mortgages (ARMs),Home Equity Lines of Credit (HELOCs), and some Credit Cards are tied to indexes that are sensitive to short term interest rate reductions. Many borrowers in these types of loans will immediately start saving money because of this rate cut.
No one can predict with certainty how market volatility and inflation concerns will affect the future policy and decision-making of the Federal Reserve. With the next Fed meeting scheduled for October 31, 2007, borrowers should take advantage of Tuesday’s rate cut. If you are considering a home purchase or refinance, now is the time to capture a lower interest rate. Consult with a professional Mortgage Planner to see how the Fed Funds Rate reduction might benefit you. Call Marc today at 775.833.1014.
Federal Reserve Update
December 2006
Fed Chairman, Ben Bernanke, and other policy makers at the Federal Reserve decided to leave fed-controlled interest rates unchanged for a fourth consecutive meeting. In a survey of economists by Bloomberg, 74% believe that this policy decision will hold through the first quarter of 2007.
In spite of the Fed’s decision to hold rates steady, long term interest rates – including home loan rates – have fallen to their lowest level of the year!
You May Qualify for a Reduction in Interest Payments
At the end of each year, Fannie Mae and Freddie Mac release their maximum loan limits for the coming year. These limits identify the maximum amount you can borrow while still qualifying for conforming loan products, which offer lower rates than alternative loan programs. Many in the real estate industry had been concerned that these limits would be lowered as property values in many areas have been declining.
Good News
Conforming loan limits will remain unchanged for the remainder of this year and throughout 2007. The loan limits for first home loans will hold firm at:
- $417,000 for home loans on one-family properties;
- $533,850 for home loans on two-family properties;
- $645,300 for home loans on three-family properties; and
- $801,950 for home loans on four-family properties.
Could This Benefit You? Ask Yourself These Five Simple Questions:
- Was your current home loan initially closed with a jumbo/non-conforming interest rate or rate higher than 6.50%?
- Do you have a Home Equity Line of Credit with a balance on it?
- Do you have an ARM schedule to reset in 2007?
- Do you owe more than $10,000 on revolving accounts or credit cards?
- Do your retirement accounts require additional funding to meet future financial needs?
If you answered yes to any of these questions, a review of your finances is in order. Interest rates are volatile and can increase quickly, so it’s important to act now. Federal Reserve Chairman, Ben Bernanke, stated this week that the core inflation rate remains uncomfortably high and the Federal Reserve is prepared to act quickly if future developments warrant.
Federal Reserve Update
October 2006
The October meeting of the Federal Open Market Committee resulted in unchanged rates. The widely expected decision followed two previous meetings where Fed Chairman Ben Bernanke and his committee decided to leave rates alone. However, the decision came with a continued warning of inflation.
Currently, the Prime Interest Rate remains at 8.25%. This means consumers can still take advantage of low rates by refinancing their adjustable loans into one low fixed rate mortgage.
The next FOMC meeting is scheduled for December 12, 2006.
Federal Reserve Update
September 2006
On September 20th, policy makers at the Federal Reserve, including Chairman Ben Bernanke, elected to leave the interest rates unchanged at the latest meeting of the Federal Open Market Committee. This news met expectations in the bond markets as it appears the Federal Reserve is going to wait for additional economic data before deciding to increase interest rates further.
This leaves the Prime Interest Rate, which banks and lending institutions use as a benchmark for setting many interest rates, at 8.25%.
Those with Adjustable Rate Mortgages scheduled to adjust or reset soon still need to be prepared for an increase in interest rates. Some borrowers with ARM loans are already experiencing rates of over 8%. Home Equity Lines of Credit, also known as HELOCs, now carry interest rates that may exceed 10.25%.
Credit card interest rates, which are often tied to the Prime Rate, remain at recent historic highs. Some credit card interest rates may even exceed 23.90%.
What should I do now?
For those who are interested in either buying a new home or restructuring their finances, consider looking into a mortgage with Low Closing Costs or No Closing Costs. With each of these options, the mortgage comes with an interest rate that is slightly higher than a normal market rate. However, in both cases the lender pays either a portion of or all of your closing costs depending on your loan amount and credit situation.
For those who are looking to take advantage of lower interest rates in the future or expect to be moving within four years, the savings can be significant!
More importantly the majority of the closing costs you pay are not tax deductible. Home mortgage interest, on the other hand, is tax deductible in most cases. So, not only could you pay less money by choosing the No or Low Closing Costs option, any additional amount you pay in the form of interest could then decrease your taxes.
Interest Rates for Fixed Rate Mortgages are still very attractive!
Fixed interest rates are at their lowest levels since mid-May. This may offer you the best opportunity to grab the lowest remaining fixed rates of the year as some experts predict rates will go higher.
If you’re considering purchasing a home or investment property, this is the time to do so. Waiting could lead to higher monthly payments for the same piece of real estate.
Consolidate higher interest rate loans and lines of credit into an affordable fixed rate loan, complete with lower monthly mortgage payments. Some customers have saved over $700 a month by refinancing.
Call me today, and I will prepare a FREE Analysis to see how a new loan program could benefit you.
Federal Reserve Update
August 2006
On August 8, 2006, the Federal Reserve voted to leave the federal funds rate unchanged. This announcement finally put an end to a streak of 17 consecutive .25% rate increases!
The current Prime Interest Rate is 8.25%, which is used as a point of reference to establish interest rates for banks and lending institutions. Although the Federal Reserve has chosen to put rates into a holding pattern for now, they will continue to review economic data to determine if future rate hikes are necessary.
If you are feeling the financial pinch of increasing monthly payments, be aware that fixed rate mortgages are still offering very attractive rates. Monthly payments can be lowered by consolidating higher interest rate loans and lines of credit into affordable fixed rate loans.
If you are considering an Incline Village home or investment property purchase, now is the time to act. Many areas have transitioned into buyer’s markets, making this one of the best times to buy a home in recent years. For more information, call Marc.
Federal Reserve Update
June/July 2006
Policy makers at the Federal Reserve, including Chairman Ben Bernanke, just concluded their two-day meeting and elected to increase interest rates for the seventeenth straight meeting of the Federal Open Market Committee.
Consumers will see higher Prime Interest Rates, which banks and lending institutions use as a benchmark for setting many interests rates. Additionally, many Adjustable Rate Mortgages (ARMs) are tied to indexes that are sensitive to short term interest rate hikes and could adjust to even higher rates later this year.
Fixed Rate Mortgages are still offering very attractive interest rates. Consumers considering a home or investment property purchase should act now. Waiting to purchase or refinance will only result in higher monthly payments.
Now is also an excellent time to refinance your mortgage to consolidate higher interest rate loans and lines of credit into an affordable fixed rate loan.
In the wake of rising interest rates, a professional Mortgage Planner can help you determine the best way to keep your monthly payments low. For more information, call Marc.
Federal Reserve Update
May 2006
On May 10th, Chairman Ben Bernanke and other policy makers at the Federal Reserve elected to increase interest rates for the sixteenth straight meeting of the Federal Open Market Committee.
Consumers can expect to see higher Prime Interest Rates, which banks and lending institutions use as a benchmark for setting many interests rates. Some credit card interest rates are also tied to Prime Rate and will hit record highs. Additionally, many Adjustable Rate Mortgages (ARMs) are tied to indexes that are sensitive to short term interest rate hikes and could adjust to even higher rates later this year.
Fixed Rate Mortgages are still offering very attractive interest rates. Consumers considering a home or investment property purchase should act now. It is also a good time to refinance your mortgage to consolidate higher interest rate loans and lines of credit into an affordable fixed rate loan. Waiting to purchase or refinance will only result in higher monthly payments.
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