Fed Rate-Cut Winners and Losers
Tuesday, January 22, 2008provided by
When the Federal Reserve meets and changes rates we all have questions: What does it mean to me? Will my mortgage rate go up or down? Is this a good time to refinance? Bankrate is here to help. We've looked at five categories -- mortgages, home equity loans, auto loans, credit cards and certificates of deposit -- to determine if the Fed's moves made you a winner or a loser. Here's a look at mortgages:
Winner: Borrowers with good credit
The surprise decision by the Federal Open Market Committee to cut the federal funds target by 75 basis points likely reflects growing fears that the U.S. economy is weakening. Ironically, such worries may be good for people hoping to see lower mortgage rates.
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Mortgage rates often dip when investors fearing an economic slowdown grow more conservative and buy up Treasuries and bonds. This causes long-term rates -- and by extension, mortgage rates -- to fall, creating an opportunity to get better terms on a loan.
However, the nation's recent credit woes mean you probably need a sound credit history to take advantage of these better terms.
"If you are a high-quality credit household and you're looking to buy a house, prices have fallen in many markets," says Doug Duncan, chief economist for the Mortgage Bankers Association. "In addition to that, interest rates have come down.
"Those two things indicate that you're likely to get a more affordable mortgage and homes will be more affordable."
People with adjustable-rate mortgages can also refinance to a fixed-rate mortgage. This will lock in their payment for years to come, regardless of the future direction of mortgage rates.
Full Story at http://finance.yahoo.com/loans/article/104266/Fed-Rate-Cut-Winners-and-Losers
