- advertisement -
Fed News   Fed announcement: June 24, 2009

Winner or loser: Mortgages
 

[unchanged] Loser: ARM holder or shopper
ARM rates have been falling in recent weeks because investors expected that the Federal Reserve would cut short-term interest rates. Now that the Fed has dashed the markets' hopes, rates on adjustable rate mortgages are likely to bounce back up.

Mortgages
See mortgage rates in your area

Historical perspective
Since mid-August, ARM rates had mostly been falling as investors became convinced that a Federal Reserve rate cut was forthcoming. On Aug. 22, Bankrate's benchmark rate on the 5/1 ARM reached 6.64 percent, the highest it had been in two months.

Then it fell, landing at 6.3 percent three weeks later. The benchmark one-year ARM had been rising most of the summer before finally falling slightly last week.

Smart strategies
If you are shopping for a mortgage, you probably haven't been seriously considering an ARM anyway because the rates just haven't been low enough. ARM rates usually are lower than fixed rates, and that's why people get ARMs in the first place.

But the rate difference has shrunk this spring and summer. In fact, the benchmark rate on the 5/1 ARM was higher last week than the average rate on the 30-year fixed. When it's cheaper to borrow with a rate that lasts 30 years than to borrow for a rate that lasts just five years, most people take that 30-year loan.

If you already have an ARM, odds are that your next rate adjustment was probably going to be up, no matter what the Fed did, because of the way ARMs are structured.

Take action
Have an ARM and want to estimate how much higher the payment will be after the rate is reset? Try Bankrate's mortgage reset calculator.

Loser: Fixed-rate shopper
Fixed-rate mortgages don't move up and down in sync with Federal Reserve rate policy. In other words, when the federal funds rate goes down, that doesn't necessarily mean that the 30-year, fixed-rate mortgage will drop.

However, the 30-year fixed has fallen in recent weeks on the expectation that interest rates would fall across the board after the expected Fed rate cut. But that rate cut didn't come about, and fixed-rate mortgages are likely to rise in the next few weeks.

Historical perspective
Fixed-rate mortgages have yo-yoed all year. They have fallen more than half a percentage point since July on expectations of a Fed rate cut.

Smart strategies
If you're shopping for a fixed-rate mortgage, keep in mind that rates have been falling in anticipation of a Federal Reserve rate cut. Ask the loan officer or broker if now would be a good time to lock.

Take action
Want to see how a change in interest rates affects your buying power? Check out the housing affordability calculator.

[25 pt] Winner: ARM holder or shopper
Adjustable-rate mortgages are likely to go down.

Mortgages

Historical perspective
Since mid-August, ARM rates had mostly been falling as investors became convinced that a Federal Reserve rate cut was forthcoming. On Aug. 22, Bankrate's benchmark rate on the 5/1 ARM reached 6.64 percent, the highest it had been in two months.

Then it fell, landing at 6.3 percent three weeks later. It's likely to stay around there. The benchmark one-year ARM had been rising most of the summer before finally falling slightly last week.

Smart strategies
If you're shopping for an adjustable-rate mortgage, keep an eye on the differences in rates between ARMs and fixed-rate loans. There hasn't been much of a difference lately, and therefore not much reason to get an ARM. It's possible that the gap will widen, making ARMs competitive with fixed-rate mortgages again. That's not a sure thing, though.

Take action
Have an ARM and want to estimate how much higher the payment will be after the rate is reset? Try Bankrate's mortgage reset calculator.

Winner: Fixed-rate shopper
When the federal funds rate goes down, that doesn't necessarily mean that the 30-year, fixed-rate mortgage will drop. Sometimes the fixed-rate mortgage follows the Fed and sometimes it doesn't. In recent weeks, as investors became convinced that the Fed would cut short-term rates, fixed-rate mortgages fell. Now that the Fed has cut the federal funds rate, as expected, fixed-rate mortgages should remain low.

Historical perspective
Fixed-rate mortgages have yo-yoed all year. They have fallen more than half a percentage point since July on expectations of a Fed rate cut.

Smart strategies
If you're shopping for a fixed-rate mortgage, keep in mind that rates have been falling in anticipation of a Federal Reserve rate cut. Ask the loan officer or broker if now would be a good time to lock.

Take action
Want to see how a change in interest rates affects your buying power? Check out the housing affordability calculator.

[50 pt] Winner: ARM holder or shopper
Adjustable-rate mortgages are likely to go down.

Mortgages

Historical perspective
Since mid-August, ARM rates had mostly been falling as investors became convinced that a Federal Reserve rate cut was forthcoming. On Aug. 22, Bankrate's benchmark rate on the 5/1 ARM reached 6.64 percent, the highest it had been in two months.

Then it fell, landing at 6.3 percent three weeks later. It's likely to stay around there or maybe fall even farther. The benchmark one-year ARM had been rising most of the summer before finally falling slightly last week.

Smart strategies
If you're shopping for an adjustable-rate mortgage, keep an eye on the differences in rates between ARMs and fixed-rate loans. There hasn't been much of a difference lately, and therefore not much reason to get an ARM. The gap probably will widen, making ARMs competitive with fixed-rate mortgages again.

Take action
Have an ARM and want to estimate how much higher the payment will be after the rate is reset? Try Bankrate's mortgage reset calculator.

Winner: Fixed-rate shopper
When the federal funds rate goes down, that doesn't necessarily mean that the 30-year, fixed-rate mortgage will drop. Sometimes the fixed-rate mortgage follows the Fed and sometimes it doesn't. In recent weeks, as investors became convinced that the Fed would cut short-term rates, fixed-rate mortgages fell. Now that the Fed has cut the federal funds rate even more than expected, fixed-rate mortgages should remain low and perhaps fall further.

Historical perspective
Fixed-rate mortgages have yo-yoed all year. They have fallen more than half a percentage point since July on expectations of a Fed rate cut.

Smart strategies
If you're shopping for a fixed-rate mortgage, keep in mind that rates have been falling in anticipation of a Federal Reserve rate cut. Ask the loan officer or broker if now would be a good time to lock.

Take action
Want to see how a change in interest rates affects your buying power? Check out the housing affordability calculator.

Create a news alert for "mortgages"  -- Posted: Sept. 18, 2007
<< Previous article | Next article >>  

 RESOURCES
See mortgage rates in your area
Weekly e-mail newsletters
Quiz: Do you know your Fed?
 TOP MORTGAGE STORIES
No stories available




TABLE OF CONTENTS
 
 
 
 
Mortgages
Compare today's rates
NATIONAL OVERNIGHT AVERAGES
30 yr fixed mtg 3.95%
15 yr fixed mtg 3.08%
5/1 ARM 3.43%
Rates may include points
- advertisement -
- advertisement -
- advertisement -