What happened with interest rates this week?
Posted May 2, 2008
The conclusion of a two-day Federal Reserve meeting this week resulted in another quarter point cut to the Federal Funds Rate. This action brought the current rate to 2%, the lowest point in nearly four years.
The Fed Funds Rate is the key overnight rate at which banks loan money to one another. It is the benchmark for home equity lines of credit (HELOCs), adjustable rate mortgages (ARMs), credit cards, and other consumer loans. Borrowers in these types of loans will continue to save money due to the cumulative effects of recent rate cuts.
It is a common misconception that mortgage interest rates coincide with the Fed Funds Rate cuts. However, mortgage rates are tied to long-term bond yields. Therefore, the outlook for the economy and inflation will impact fixed mortgage rates more than recent fed fund rate cuts.
It is important to recognize that despite the current economic turbulence, long-term mortgage rates are still 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 the current market.
For information on Fed meetings:
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