The Federal Open Market Committee's, or FOMC's, decision to cut interest rates by 25 basis points is unlikely to cause much of a ripple in financial markets, according to Bob Walters, chief economist for Quicken Loans.
How soon could it affect you?
Sooner than you may think -- but not because of the Fed
That's because a quarter-point cut had been anticipated by most Fed watchers.
"The markets have fully priced that in," says Walters.
People who sit around waiting for mortgage rates to fall are also likely to be disappointed.
"Markets are efficient," he says. "Absent some really horrific economic news, I don't see a whole lot more downside or reduction of rates in the future. I just don't think that's going to be the case."
However, Walters says homeowners should be more concerned about another impending development. New lending rules go into effect in early 2008 that will cause people with high loan-to-value ratios or low credit scores to pay a premium to refinance.
“Absent some really horrific economic news, I don't see a whole lot more downside or reduction of rates in the future.”
For this reason, it makes sense for people facing such financial difficulties to refinance as soon as possible. Among the worst courses of action is to hold off on refinancing while waiting to see if interest rates bottom out following the Fed's rate cut.
"People who wait for the bottom almost always get burned," he says. "Waiting for the absolute bottom or absolute top is a sure way to miss out."
Conclusion
The Fed's decision to cut interest rates by 25 basis points could cause interest rates to fall -- or to rise. There is no way to know. However, it is known that interest rates are falling to near multiyear lows, making now the perfect time to refinance before new rules go into effect that will make it more difficult for some people to borrow.