The Federal Reserve had an emergency rate cut of .5% points on the discount rate this morning. This was coordinated with several other Central Banks around the world as a concerted effort to stem the tide of rising panic and uncertainty in the market worldwide. This means short-term rates, such as prime, will drop by .5%. This does not mean that our long-term mortgage rates will drop, necessarily.
One important note, DO NOT PANIC! The market is not reacting 100% to data but the impression of the uncertainty. The news media is going to hype the fear to keep you interested. While things may get worse for stocks, etc., our market, Real Estate and Mortgage, will turn around! Rates have been, are, and will continue to be favorable.
Mortgage rates are set by the yield on bonds known as Mortgage Backed Securities (MBS). These instruments trade throughout the day and as the price of the MBS goes up, the yield goes down and rates follow. Right now, with so much uncertainty in the market, rates have not adjusted in wide swings. 6% is the rate they have been hovering around as a benchmark.
That being said, we are, currently, under 6%! In addition, the residential mortgage market has adjusted many months ago to the credit situation we find ourselves in currently. We still have ALL of the programs we did before this blew-up. We still can close loans. And most importantly, we are still funding loans! We will not have a squeeze on our ability to originate, close and fund loans.
Take a deep breath. Relax. And, in my case, have another cup of coffee!
improvman