What you need to know about the FED rate cut !!!

Hello again,

I decided to take a break from the "Resolution of 2008 plan" to give you some insightful news about the FED rate cut today!

This is what you as homeowners need to know about the FED rate cuts......

1: Their will probably not be much movement on LONG-TERM mortgages

Today investors reacted in a way of disappointment because they were expecting a rate sute of .5% rather than the .25%. The market has already priced that and adjusted rates accordingly; 30-year fixed rates have been falling for some time.
In July, the average rate on a 30-year fixed mortgage was 6.66%. Last week, it was 5.82%. So, a rate cut won't really do very much to lower long-term rates. They're already low. So if you want to refinance, it's a good time to start shopping!

2: ARM (Adjustable Rate Mortgages) resets will probably not to be as severe!

The Fed move today may be more significant to borrowers with adjustable-rate mortgages than what the government is doing in freezing subprime interest rates. Most resets on adjustable rate mortgages will reset in the middle of next year. Combined with the fact that the Fed is cutting rates, will make these resets more manageable for prime borrowers, and people "PRIME BORROWERS" (usually 680 credit scores and above) ARE NOT covered by recently announced foreclosure-prevention plan.
So, if you had an adjustable rate mortgage that started at 4.5% and your rate was going to reset at 7.5%, you may only face a rate reset of 5.7%. Still bad news, but more managable than before..... remember you have to stabilize first!

3: HELOCS (Home Equity Line Of Credits) will have better rates

Home equity lines of credit are cheaper after today. It may take up to three billing cycles to see the decrease in your bill. If you are thinking of consolidating debts or you need money for medical bills or college expenses, you may want to consider shopping around for a HELOC since lenders are likely to price in the Fed's cut immediately.

4: Keep your situation in perspective

This rate cut will not be the silver lining that cures the problems in the housing market. But since the Fed is in a rate cutting mode, and the immidiate effect on that will help consumers. The bad thing is that the Federal Reserve can't control things like the Credit Crunch and the impact of it, otherwise they have shown by these cuts that we would be in a lot better situation as a whole.

Were we need to look is inflation, job growth and the overall health of the economy as signs of when the troubled housing market will ease. There are 2 main issues here; One is inventory of houses on the market and, Two the affordability of houses today. Interest rate cuts won't do much to make that go away.

Folks we may be in for the long haul, so make the right decisions!!!

If you have any questions please do not hesitate to contact us @ 303.666.6550 or email me at matt@myprosperityfinancial.com

You can visit our website http://www.colomortgages.com/ for more insightful mortgage information, where you can also subscribe to our monthly financial newsletter !

Talk to ya soon,

The Mortgage Insight Specialist...