Fed Drops tthe Fed Funds Rate by .75%

The Fed just lowered the Fed Funds Rate .75% and the Discount Rate .75%. This results in the following current rates:

Discount Rate 2.5%
Fed Funds Rate 2.25%
LIBOR 2.56%
Prime 5.25%

How does the Fed affect mortgage rates?Well, if you have a home equity line of credit based on Prime or short term ARMs based on LIBOR, you should see an immediate reduction in your interest rate in the coming weeks. However, if you are considering a fixed rate loan or longer term ARM with a fixed period of 3, 5, 7 or 10 years, rates on those types of loans are not directly related to the Fed. Instead, these rates are closely tied to the Mortgage Backed Securities that trade on the bond market. As typically seen long term mortgage rates spiked on the news. The financial markets are extremely volatile and most likely mortgage rates will continue their roller coaster ride; advise is to set a target rate and lock when it is available.

Paul Cantor helps clients make informed decisions regarding their finacil needs and may be reached at TrustMor Mortgage Company on the web at www.PaulCantor.com or by phone at (804) 433-1500.