Monday, February 4, 2008

The Federal Reserve and Mortgage Rates

By: Shawn Tihen
Senior Mortgage Banker

In case you haven’t heard, it’s an election year and one of the biggest topics between the candidates is how to stimulate the economy and to reverse the troubled housing market, which has us headed towards a possible recession.

The fear of recession and other factors has caused the Federal Reserve to cut the Federal Funds Rate twice in the last few weeks; once by ¾ of a point and then followed up by a ½ point.

These rate cuts have lead to the following question, “I hear interest rates have dropped, should I refinance my home loan?”

First, the Federal Funds Rate does not have a direct correlation to mortgage rates. Therefore, even though the Federal Reserve cut rates by a total of 1.25%, mortgage rates did not go down by that percentage.

However, because of the economy, mortgage rates have dropped recently to levels not seen in almost four years. So again the question; does it make sense to refinance?

The decision to refinance is unique to every client’s situation and many factors have to be considered including: how long you are planning on staying in the home, the new interest rate and the closing costs to obtain the loan. Each person must determine if a refinance will help their financial situation while meeting their short and long term financial goals.

Mortgage Industry In 2008

What will 2008 bring in the mortgage industry?
By: Shawn Tihen
Senior Mortgage Banker

The most common question I hear as a mortgage professional is “what do you think interest rates are going to do?” And my answer is always the same “I don’t have a crystal ball and no one can accurately predict what the market will do on any given day!”

What I can tell you is that there will be lots of change. Many mortgage companies will cease to exist; 214 of them have already dropped out of the business completely. And many companies will be purchased by other companies; ie. Bank of America just announced that they are buying Countrywide.

The other thing we can be certain of is that lenders will continue to tighten their lending standards. Lending institutions have already and will continue to require borrowers to have better credit and in many situations a down payment.

What does this mean to you? As a consumer, you need to monitor your credit scores and make sure you meet with a mortgage professional that will give you the necessary advice to navigate through the market we are in today.