What the Fed Rate Cut Means to Consumers

183661 Resource 178438 178982 178982 1190173449788 1198338462826 Controlled Fed Rate Cuts May Not Lead To Lower Mortgage Rates in Flagstaff

History Shows That the Opposite Effect Is a Risk for Today's Home Buyers

Today’s Federal Reserve action may an impact on housing contrary to what you may be hearing. Borrowers waiting for a lower fixed-rate mortgage may be waiting for a long time. The Fed funds rate is not directly tied to mortgage rates, and may, indeed, work in the opposite direction of long-term mortgage rates. If the interpretation of the rate cut over the next few days continues as the initial market reaction (<a title="Wall Street Journal on rate cut impact" href="http://online.wsj.com/article/SB119012943253231120.html?mod=economy_lead_story_lsc" target="_blank">the dollar fell sharply, long-term Treasury-bond yields rose, and oil prices also jumped</a>), mortgage rates will rise. <a href="http://blog.bestflagstaffhomes.com/public/item/183610">If you have a Home Equity Line of Credit (HELOC) or credit cards tied to the Prime Rate, the Fed's cut in the Fed Funds Rate just put a little money in your pocket.</a> That can improve consumer spending. But if you are planning to buy a home, the Fed’s rate cut may mean you should lock in your interest rate and buy now rather than wait. The Fed funds rate cut actually is more likely to increase mortgage rates in the next few months than to decrease them.The chart below clearly shows how Fed Funds Rate cuts do not translate into cuts in fixed-rate mortgages. In January 2001, the Fed Funds Rate was at 6% and 30-year fixed rates averaged 7.03%. By December 2001, following 4.25% in cuts throughout the year, home loan rates were actually up to 7.07%.                                    <img alt="Graph of fed funds rate vs. 30 year fixed rate over time" hspace="0" src="http://annheitland.smugmug.com/photos/197553738-S.jpg" align="baseline" border="1" /> 9 application/xml false Fed rate Federal Reserve rate cut Flagstaff mortgages Flagstaff real estate issues What the Fed Rate Cut Means to Consumers Cut Won't Help with Mortgage Market Problems According to this Analysis http://online.wsj.com/article/SB119016472637231937.html?mod=rss_PJ_Main Mozilla/4.0 (compatible; MSIE 7.0; Windows NT 5.1; .NET CLR 1.1.4322; .NET CLR 2.0.50727) 127.0.0.1 127.0.0.1 aheitland 12.206.28.77 false true false false true 178975 false false true false false false true 178438 blog blogsite/BestFlagstaffHomes/web