They have a lot of work to do…

Today the Federal Open Market Committee adjourned their meeting without a change in interest rates.  The primary focus of Chairman Ben Bernanke was on the need to resuscitate our private credit markets.  The Feds announced that they are prepared to buy long term treasuries if the credit trend continues to be tight in the market.

With so much attention to mortgage rates with recent refinance inquiries and now with increasing purchase activity, banks are exercising the law of supply and demand.  Currently the Fannie Mae 30 year fixed coupon rate is trading in such a fashion that mortgage rates should be near 4.5%.  However, due to the slow banking inquiries over the past 24 months many banks and lenders have downsized their operations to stay afloat.  With a surge in new applications the pipelines are full and the banks are holding rates slightly higher so they can manage the current loans in process.  The capacity of the lenders should be eased in the coming week or weeks as these loans begin to clear the temporary warehouse lines.

Stay tuned and be prepared if you have not already began the refinance process.  It is best to know you current situation and get your loan application started so when the desired rate is available you can grab it before it’s gone!

Call me at 503.798.9183 or email me by clicking on my name –> Conrad Venti.

Today the Federal Open Market Committee (FOMC) adjourned their two day meeting with a reduction in the Fed Fund rate.  The prime interest rate, which is the primary factor that determines home equity loans, consumer credit cards, etc will likely follow tomorrow coming down to 3.25%.

Thus far in 2008 we’ve seen the prime rate drop several times, unfortunately each resulting in slightly higher mortgage rates.  The trend for rates to increase is usually temporary, but it’s important to note the reduction in the prime interest rate does not mean a reduction in the 30 year fixed mortgage rate. However, in today’s economic environment, it is very difficult to determine what the “normal” reaction is to anything.  This afternoon mortgage rates held steady at morning levels and the bond market finished in positive territory which may indicate lower rates on Wednesday.

The announcement by the FOMC did include the key statement that it will use “all available tools” to generate a resumption in growth.  This positive statement is likely the factor driving the bond market to finish in positive territory.

With so many variables in the rate envrionment today, it is most important to be prepared.  As I wrote last week, now is the time to make a move if you’re thinking you need to refinance or if you’re shopping for a loan.  Don’t forget, opportunities are never lost…someone will take the ones you miss!

Today the Federal Open Market Committee unanimously voted to reduce the benchmark rate to 1%.  The prime interest rate (rate consumers borrower at) will likely follow.  The .5% dropped brings the fed funds rate to a half a century low.

The Feds have made the move to correspond with recent actions to help our hurting economy.  The committee stated, “there are still downside risks to growth”, knowing that we are still going to experience a slowing period.

It is important to remember that the prime interest rate is reflected in consumer debt and some installment loans.  The benchmark rate is the rate at which the banks borrower funds from the fed overnight.  Mortgage rates have seen a slight increase since the announcement today and may settle in the coming days.

Today the Federal Open Market Committee unexpectedly lowered the federal funds rate by 50 basis points (.5%) to 1.5%.  Several central banks from around the globe also reduced funds rates by 50 basis points in an effort to restore some confidence in the markets.  The prime interest rate will be reduced to 4.5%.

The FOMC acted fiercely with this cut due to evidence pointing to weakening economic activity and a reduction in inflationary pressures.  The financial turmoil and perceived unavailability of credit has caused spending to decrease significantly.  The FOMC hopes the reduction will encourage spending and expects the decline in energy and other commodity costs will reduce the upside risks to inflation.