Good Morning Friends and Clients,Many of you have recently contacted us asking about the latest overseas and domestic economic news… and in particular the aggressive move of the FED to cut rates by 3/4%. As you know, we are not mortgage brokers, but after consulting with our trusted colleagues, we’ve prepared a brief summary of this week’s news and how it will affect you as homeowner or potential homeowner. Always feel free to contact us directly for an analysis of your specific situation at sold@route56homes.com or 858-456-9152.
While we were enjoying our Martin Luther King Holiday, Asian and European markets were in a free fall. It turns out that yes, the U.S. economy is still the world’s leading economy. The old adage “when the U.S. sneezes, the world catches a cold” seems to hold true. While some European and Asian countries seemed confident that they were finally independent of our economy, it turns out that with the U.S. flirting with a major recession their economies suffered right along with ours.
Insert the Federal Reserve. The Federal Reserve is not owned by the government. In fact, it is largely owned by 5 large U.S. Banks who in turn have large shareholders from Europe and Asia. As these shareholders saw their own markets tumbling, they began to put pressure on the U.S. Banks to have Feds to step in immediately and make a drastic move to spur the U.S economy.
So, while some of us were enjoying the day off, the Feds held an emergency inter-session meeting and lowered both the Discount Rate and the Feds Fund Rate a whopping .75%. The last time the Feds held an emergency meeting between scheduled meetings was September of 2001.
Mortgage Rates had been falling prior to this move, and fell again in response to the Fed’s move. Rates are once again near all time lows. The stock market in turn has proved extremely volatile with huge early losses this morning and a rally midday. Mortgage Rates were re-priced two times yesterday. You’ll also see a 3/4% drop in your credit card rates, auto loans, adjustable 2nd mortgages and HELOCs (home equity lines of credit) as these rates are more directly tied to the Prime Rate.
Prime is now at 6.5%. Mortgage rates are already so low and the Feds meet again next week. Many feel the Feds will make another cut. There is pressure now for the European Central bank to lower their rates. So far, the Central Bank has held steady. If they do make a move, it will leave the door open for the Feds in turn to lower rates once more next week.
What does this mean to you, the homeowner? Well, it points out that the U.S. economy retains its position as the world’s dominant economy. It also means that rates are so low that now is definitely a great time to refinance your current mortgage. If you are on the fence and have been waiting to purchase a home, contact us now so that we can analyze your situation.
If the Feds make another move, it will most likely be soon. Real Estate is at or near the bottom in most areas and there are wonderful opportunities to roll the clock back and purchase a great property at a huge discount.
If you own a home, consult your mortgage broker and evaluate if you could lower your monthly payment by refinancing. If you have an adjustable mortgage consider refinancing to a fixed rate mortgage. If you are looking to purchase a home, many are now saying “sooner rather than later”. You will have a huge tax advantage and can lock in on a fixed rate mortgage in the low 5% range.
As always, I am happy to answer any questions you may have regarding any of this. 858-456-9152 or sold@route56homes.com.
Warm Regards,
Aaron & Michele Smith