Flagstaff Mortgages Volatile but Lower Now Than The Beginning of the Week

The markets were looking for a holiday treat yesterday by way of a 1/2 point Fed cut in the Discount Rate.  When the news arrived that the cut was only 1/4 point, stock traders threw a tantrum.  But this morning, a surprise gift arrived. The Fed announced a plan to help inject $40 Billion dollars into the markets by opening a new action facility.  This means that the Fed will lend money to banks for shorter terms and these banks will be able to borrow against a wider range collateral.  The 28-day term for these funds will help ease some pressure in the money markets and increase liquidity in the frozen short-term commercial paper market.  This may also narrow the higher spreads in Libor rates and thereby improve our rates for home loan ARMS.

Lots of market movers will be in the news tomorrow. Remember that the market sentiment can turn very quickly as was evident last week.  We will watch for signs of inflation in the reports because that will result in additional spikes in the mortgage interest rates.