Mortgage News
How will the Fed’s rate cut affect my mortgage rate?
I have been pre-approved for a mortgage through my credit union. The loan is a 5-year ARM for 80% of the value, and a 5-year Balloon for 17% of the value, and I am putting 3% down on the house. I am set to close 1 week from today. I have a loan commitment from the lender.
I read in the news today that the FED is considering curring interest rates for the money that banks borrow, (which to my understanding is how they set thier interest rates??) by .25 to .50 %.
If they do cut rates, would that affect a credit union? Should it lower the rate that I am being offered for my home loan? Would I be foolish to ask my lender (credit union) if my rate goes down?
What are your thoughts?
Thanks!
Most likely it won’t. The Fed rate isn’t strongly correlated to mortgage rates.
Mortgages are more strongly correlated to T-bill rates, such as the 1-year T-sec. These go up and down depending upon how much money the govt. lends and how many people want to buy our bonds. It’s determined more by China and Saudi Arabia than the fed. The reason for the strong correlation is that mortgages ‘compete’ with T-bills for money. Both are long-term, relatively safe places to earn some interest income.
–>Adam
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