Feds cut discount rate... (loan, credit, borrowing, mortgage rates)

[98stage2]

...what does this mean for Mortgage rates?

[MikeJaquish]

I think that mortgage rates will be stable, in the conventional arena.
I think mortgage rates in JUMBO will be volatile and a little high.

Mortgage availability is a key issue.
Client trying to buy a second home said today she was told to come up with 35% down. With pretty good credit.
Ouch!

[98stage2]

If I closed on a loan today would I be eligible for the rate cut since it came on the day of closing?

[MikeJaquish]

Originally Posted by 98stage2

If I closed on a loan today would I be eligible for the rate cut since it came on the day of closing?

Probably not.
The Fed cut the discount rate, but that is not directly linked to your mortgage.
You were locked in already, weren't you?

[98stage2]

No. I was told that if rates dropped before I closed I would be eligible for the lower rate (SECU).

[MikeJaquish]

Originally Posted by 98stage2

No. I was told that if rates dropped before I closed I would be eligible for the lower rate (SECU).

Did mortgage rates drop?
The Fed does not control mortgage rates.

The Fed tinkers with the market to stimulate it or to calm it, and the market responds, ideally in the direction the Fed is hoping for.
The reduction in the Fed Discount Rate today is aimed at the cost of borrowing for the bank, and cannot immediately change consumer interest rates.

Your loan officer at the credit union should be able to clarify this easily enough for you.

Fed Approves Cut in Discount Loan Rate: Financial News - Yahoo! Finance (broken link)

[MrsSteel]

I'm no expert, but I see no reason for mortgage rates to drop as a result of the Fed's decision on Friday morning. The Fed did not do anything to interest rates - only the discount rate. There's a big difference.

I think Marketplace does a pretty good job of explaining the details. Here's a link to their story.
Marketplace: Fed's action gives markets some relief

[NewToCA]

First off, there is usually a lag between Fed cuts and rate cuts. The Fed cut is not like the bank lowering the rate, and sometimes short term rates may be cut but not long term, they are generally governed by different factors. If you ever notice it, over a long period of time you will see a narrowing and then expansion in the spread between a fixed 30 year mortgage and a one year ARM. So no, it doesn't mean your interest rate on the mortgage just dropped 1/2 percent.

[98stage2]

siggggghhh, a guy can wish I guess.

[MrsSteel]

There's still a chance that the Fed may drop interest rates when they meet next month. That usually affects consumer loan rates. So if you aren't closing for another month or so, there may still be hope!