From Homescape

The recent interest rate cuts from the Federal Reserve are expected to push down the cost of borrowing in this country and provide relief for holders of adjustable-rate mortgages connected to the federal funds rate. Some economists say the recent cuts will likely cause monthly mortgage payments to dip at the next reset, but it’s uncertain on how much it will dip, and the impact it will have on new fixed-rate mortgages. I’m not a mortgage broker or an economist, so to get a better understanding of how the recent cuts will influence my wallet, I decided to surf the Web to see what the experts had to say. Below are some sites worth checking out.

The MortgageReports.com
Dan Green, a certified mortgage planning specialist at Mobium Mortgage, argues that the Fed cuts will lead the country to runaway inflation. Green gives a pretty thorough argument in his blog, “With Another Rate Cut, The Federal Reserve May Be the Proverbial ‘Fool in the Shower.’” The mortgage specialist’s main point: “When the Federal Reserve makes a cut to the Fed Funds Rate, the change is not felt by the economy straight away; it takes some time for the economy to adjust to new market conditions.” 

The MortgagePorter.com
Rhonda Porter, a top mortgage producer at Mortgage Master Service Solution, is assessing the situation with a cautious eye, but feels the Feds’ recent action will move the economy in a positive direction. Porter advices people to lock in their interest rate if they plan on closing on a home within the next 30 days.

“The [Fed Reserve] committee expects inflation to moderate in coming quarters, but it will be necessary to continue to monitor inflation developments carefully. [The Fed’s] policy action, combined with those taken earlier, should help to promote moderate growth over time and to mitigate the risks to economic activity. However, downside risks to growth remain. The committee will continue to assess the effects of financial and other developments on economic prospects and will act in a timely manner as needed to address those risks.”

Bankrate.com
Bob Walters, chief economist for Quicken Loans, tells Bankrate.com, that “there is no easy answer to how — or even if — the Fed’s rate cut will impact fixed-rate mortgages. As a result, these mortgages are more sensitive to changes in overall economic outlook than to Fed rate changes. Fears about inflation or recession, oil-market volatility and other factors sometimes have a greater impact on long-term rates than the Fed.”

In fact, the economist believes that long-term rates were more likely to change before the Fed announced its decision, as bond traders priced in the likelihood of an October cut. He says people should keep a steady eye on the bond market and the 10-year Treasury rate to truly see which direction mortgage rates will go. 

While most analysts say the Feds recent rate cut is intended to have more of a psychological impact on consumer confidence than produce quick financial relief, when all is said and done, there will be some winners and losers. Homeowners with equity lines of credit will receive some relief in their bills, and people who put their money in a savings account will earn less interest with each Fed rate cut. And let’s not forget about the people with balances on their credit cards. They’ll be seeing a much appreciated dip in their monthly interest rates.

Do you think the rate cuts will help the housing market?