The Fed slashes rates
The Federal Reserve cut a key short-term interest rate from 4.25 percent to 3.5 percent this morning, a move that "stunned markets," as the Guardian in the UK put it. This was not a scheduled meeting.
The Fed's Federal Open Market Committee said in its statement that it is reacting to signs of "a deepening of the housing contraction as well as some softening in labor markets":
Appreciable downside risks to growth remain. The Committee will continue to assess the effects of financial and other developments on economic prospects and will act in a timely manner as needed to address those risks.
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Comments
How will this effect mortgage rates? I've noticed that there isn't exactly a one to one relationship between the fed rate and mortgages. Rates have been dropping. Will they continue to drop, stay the same? What kind of conditions would cause them to rise again? For anyone waiting to refinance or possibly purchase, this is the burning question...
Posted by: Debra | January 22, 2008 10:42 AM
You're right, mortgage rates don't always move in concert with the Fed. If I can get some solid answers to your questions, I'll do a How-to Monday post about rates.
Posted by: Jamie Smith Hopkins | January 22, 2008 10:44 AM
Unless you're in the market for an ARM, the numbers you want to look at are the 10 and 30 year notes. Yields on both are down today, meaning mortgage rates should move correspondingly lower. These rates are much less volatile, but have fallen steadily over the past few weeks. Now is a great time to refinance.
Posted by: Mitch | January 22, 2008 1:28 PM