Hold Your Horses!

Reminder: We want our clients to be informed & educated!
The fed cut short term rates by a half point last week. That means lower interest rates for real estate finance, right? Not so fast! Rates for a 30 year fixed actually inched up slightly over the last week. Check out this article from bankrate.com to learn a bit more.
http://bankrate.com/brm/news/mortgages/20070920_rate_cut_affect_mortgages_a1.asp
History says that the chances of rates following after a rate cut are close to 50/50!
“There is zero causation between mortgage rates and the Fed reducing its target for the federal funds rate,” says Dan Dowling, president of United Mortgage Capital Group.
Why?
· Mortgage rates fluctuate based upon investor predictions concerning long-term inflation.
· Mortgage rates react to market forces. For example, prior to the short term rate cut, rates had dropped from 6.82% to 6.32% over the past 8 weeks!