How is the Real Estate bust now? Are we out of the red, and on our
way back to some solid ground? Jeff Englehord is a Seattle Mortgage
broker, he pass this info, Thanks Jeff!
---------- Forwarded message ----------
From: Jeff Englehorn <JeffE@accruwealth.com>
Date: Tue, 18 Sep 2007 12:28:44 -0700
Subject: What does the Fed's decision today mean to you?
To: jeffe@gfgmortgage.com
In my ongoing desire to keep you informed on what's going in with the
mortgage market, I'm writing in response to the breaking news that the
Federal Open Market Committee (FOMC or The Fed) led by Ben Bernanke
(formerly led by Alan Greenspan) have dropped the overnight interest
rate (the Fed Funds Rate) from 5.25% to 4.75%. While you might not be
borrowing millions of dollars over night, you might have a loan or two
that will be affected by this rate change. The Fed Funds Rate is the
margin from which the Prime Rate gets its basis. Typically 3.0% points
higher than the Fed Funds Rate, the Prime Rate has dropped from 8.25% to
7.75% - meaning that if you have a 2nd mortgage Line of Credit (HELOC),
it has dropped by half a percentage point! After dropping to a historic
low of 1% (4% Prime Rate) in 2003, this rate held steady through most of
2004 then began climbing until it stopped at 5.25% (8.25% Prime) and has
held steady ever since.
You might be asking, "What does this 50 basis point drop mean to me?"
It means that if you had a $60,000 line of credit at Prime + .250 (was
8.500%, now 8.00%) your minimum monthly payment has dropped from $425.00
to $400.00. Not earth shattering, but enough to buy you a couple more
lattes per month. Your interest difference will begin tomorrow, meaning
that from Sept 1 to Today, you'll pay interest at your old rate, and
from Sept 19 to Sept 30, your interest will be based on the lower
amount.
If you are in a fixed rate second mortgage, or do not have a Line of
Credit, then this may not affect you much in the here and now. However
if you're looking to refinance an adjustable rate mortgage in then next
12-24 months, you may see shorter term rates moving downward a bit from
the recent highs they've been at these past few months. Of course this
is speculation and others are saying the opposite may happen (who
knows?!).
If you listen or watch the news you will find that there are a number of
opinions and ideas of what this means for our economy - some experts say
this will help move toward solving the liquidity "crisis" we've been
hearing about and experiencing these past months, where many banks and
lenders have had to shut down due to the record number of foreclosures
(foreclosure rates haven't been this high since the Great Depression).
Others say it has come too late to help people to refinance out of bad
loans that have put them on the brink of foreclosure. I've read that
this could have an interesting effect on the rates on your credit cards
as well - while it won't decrease the number of credit card offers you
get daily, it could mean a lower rate if you take 5-10 minutes to phone
your credit card company and ask. On the flip-side, it also means your
savings/CD/money market rates will dip, meaning the gains you've seen
over the past couple years will not be as high as they have been. Some
say this will relieve inflationary pressure, others say it will
stimulate more inflation. As I said, there are a number of opinions out
there, so the real result remains to be seen. For up to date news and
opinions, you can visit www.marketwatch.com
<http://www.marketwatch.com/> or turn your television to CNBC.
If you have more questions on how this may or may not affect you on a
personal level, feel free to call or email me, as the impacts could make
a difference in your overall financial plan for the short and long term.
Have a great day and let me know if there's anything I can do to help!
-Jeff
Jeff Englehorn
mobile - 206.380.8888
office - 425.374.5050
fax - 425.609.0065
Helping you take care of that which matters most!
www.gfgmortgage.com <http://www.gfgmortgage.com>
<http://www.accruwealth.com/>
--
Vipin K. Singh
read my blog
@ www.MyTypes.com/vipin
