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National News • December 12, 2007
Mortgage Matters by Horse Women & Entrepreneur, Melissa L. Cohen
The Fed has done it again and cut interest rates for a second time this year by .25% bringing the fed funds rate to 4.50% and the Prime rate to 7.50%.
What does that mean for consumers?
Any consumer who has a home equity loan should cheer as the rates on their loans will drop by .25% the next time their rate is reset - which is monthly. While it may not be a huge savings, every penny does count and will help to bolster consumer confidence. Credit card rates and car loans will also benefit from the Fed cut which will help as well on the confidence side.
What about mortgages?
Mortgage rates follow the bond market - not the Fed-funds rate. The 10-year Treasury is the basic benchmark for mortgages today. Initially, bonds did not cheer the Fed cut and mortgage rates actually moved up after the announcement. Bonds, however, are data-driven and the weak earnings reports have cheered up the bond market and rates have settled back down - for now. We are in a very data-focused market - so any piece of bad economic news will help bond yields to fall and drive mortgage rates down. On the flip side, strong data will spook bonds and cause mortgage rates to go back up. Obviously, we hope for lower rates but not at the expense of the economy. The outlook for the balance of the year is very unclear - and the roller coaster ride continues.
Let's not overlook the fact that rates really are very attractive today with fixed rates as low as 6.00% - a great reason to get into the real estate game. As they say, you have to be in it to win it.
Melissa L. Cohn
President/CEO (Hunter Jumper Rider &: Competitor)
The Manhattan Mortgage Company
