6 Things To Know About The Fed Rate Cut

The Federal Reserve this week reduced the federal funds rate to a range of zero to 0.25 percent.  The rate cut likely will not impact 30-year, fixed-rate mortgages. The real impact will be on consumer loans tied to the prime rate, such as home-equity lines of credit and credit cards with variable interest rates.  Borrowers with loans tied to the prime rate may see an interest rate decrease.

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U.S. regulator sees mortgage rate below 4%.

James Lockhart, director and chairman of the Oversight Board of the Federal Housing Finance Agency, which oversees Fannie Mae, Freddie Mac and the 12 Federal Home Loan Banks, is predicting mortgage rates to go “well below 4 percent,” as a result of the government’s efforts to ease consumer credit and jump-start home sales.

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Home buyers look for their own bailout with a 4.5% mortgage rate

After hearing news that the U.S. Treasury Dept. is working on a plan that could reduce interest rates to as low as 4.5 percent, many consumers were reluctant to complete their applications for new mortgages, thinking they may receive a better rate in a few weeks.  Consumers worried about missing out on a low rate can ask their broker or loan officer to lock in today’s rate with the stipulation that they can receive a lower rate should one become available within 60 days.  Some brokers offer 60-day locks with that option, while others may charge a fee.

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A possible drag on bank lending

A proposal by the Federal Deposit Insurance Corporation to raise the insurance premiums on banks that finance loans through borrowing from the Federal Home Loan Banks could make it more difficult for consumers to get mortgages from small community banks.

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