Rates Expected to Drop but not stay there
The Federal Reserve is expected to announce a rate cut tomorrow, Wednesday, October 29th. We don’t know for sure yet, but Bernanke is expected to cut the Federal Funds Target Rate by about ½%
However, rates have been drifting up over the past couple of weeks, and the last nice rate drops we saw were immediately followed by sharp jumps back up. Why? The Fed only sets a target rate. They don’t have as much power over rates as most people think. When the Stock and Bond markets are doing as badly as they have been lately, investors get jittery, and rates start going up again because a fear premium gets built into the rates.
Given the current volatile situation, I’ve been recommending that borrowers have their Loan Officers lock their customers in on any significant drop in rates. Most rate locks are good for 30 days. Some Bankers and Brokers have the ability to float the rate downward, making one adjustment to the rates within the 30 day lock period IF rates drop by more than ¼% or so.
Using this strategy lets you have it both ways. You protect yourself against rate increases, but your Loan Officer can still float your down if the market gets markedly better, i.e., if rates drop by ¼% or more.
NOTE: You really want to be careful on the points and other fees some brokers charge. Find out if the quote you are getting is for loans with no points. Break out the magnifying glass and read the fine print, and most low rate quotes are for borrowers paying from ½% to 2% or more in points.*
If you have any questions or want more information, click on the link below or the Contact Us menu item on the website. As always, I gladly offer free advice and no obligation quotes to mortgage shoppers:
http://chicagomortgagefunding.net/contact-us/
*Residential Rates only. Most Commercial financing requires the payment of one of more points either up front or added to the loan amount.


