After global financial markets took a dive Monday on fears that the world’s largest economy was headed toward recession, the Federal Reserve took swift and immediate action. In an emergency meeting, the Fed cut its overnight lending rate by 75 basis points, hoping to prevent a complete market meltdown. At opening Tuesday, stocks plunged on Wall Street, with the Dow Jones dropping 465 points at its lowest point, then regaining some ground to close just below the 12,000 level - its lowest in 16 months.
Frank Nothaft, chief economist for Freddie Mac, calls the Fed’s cut “good news for people who have mortgages or are shopping for a mortgage.” Borrowers with adjustable-rate mortgages (ARMs) indexed to the prime rate will benefit as banks follow the Fed’s lead and lower the prime rate to 6.5. Subprime borrowers expecting interest-rate resets will see a smaller increase in their payment, and in some cases “maybe even a decline,” according to Nothaft.
What about long-term interest rates? The most recent Freddie Mac survey of mortgage rates put the 30-year fixed rate at 5.69 percent - the best it’s been for over 2 1/2 years. Where the long-term rates go from here depends largely on the perceptions of market investors and whether they believe the Fed’s cuts will be enough to boost the economy.
Borrowers seeking non-conforming jumbo loans (those not guaranteed by Freddie Mac and Fannie Mae) will continue to pay higher rates - at least a full percentage point higher than loans below the $417,000 loan limit.
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The Author: Sandra Tuell Website: http://www.newhomes.com About: As weblog author for Homes Advisory, the blog for New Homes Realty, Inc., Sandra Tuell covers topics that run the real estate gamut, written expressly for the home buyer. On the blog, home buyers will find practical information and advice on preparing their existing homes for sale, enlisting the services of a buyer’s agent, searching for new homes, making an offer and closing the transaction. Sandra regularly presents real estate news from the perspective of how events will impact home buyers and the real estate industry in general. Trained as a journalist, Sandra stepped into the real estate industry as an accredited home staging specialist, interior arranger and color expert. Since March 2007, Sandra has researched, commented on and explored happenings in the real estate industry, including home building, home mortgages and financing, real estate investing, and the economy. With a passion for all that is pertinent to the design, comfort, livability and marketability of the home, Sandra also provides tips and insights for homeowners who wish to maximize the potential of their personal spaces and turn their new houses into homes. For the past four years, Sandra has operated her own interior arrangement and home staging company, Roomscapes, servicing clients in Pinellas County, Florida. Previously, Sandra worked in the corporate world as a marketing professional, applying her creative energy in a variety of roles including advertising, promotions, special events planning and web content creation. Her current position as a writer for New Homes Realty allows her to bring together her love of design and her educational training as a journalist. "It's really the best of both worlds," says Sandra.
This entry was posted by Sandra Tuell, on Wednesday, January 23rd, 2008 at 2:50 pm and is filed under Real Estate News. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.
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