How Did The Historical Fed Rate Cut Affect Your Mortgage?

For a while it seemed like the Federal Funds target rate had no where to go but up. Well, after today’s move to slash the target rate to a historically low zero to .25 percent, we’ve really hit a bottom. (And no, as crazy as things may seem, the Fed Rate cannot go into negative territory)

Cheaper Home Equity Loans and Traditional Mortgages
Normally, when the Federal Reserve makes a change to this target rate, the most popular interest rates to be affected are on home equity loans, auto loans, and credit card loans. But given this historical rate cut was everything but ordinary, the effect it had on the mortgage market followed suit. As stocks soared after the news of this of rate cut, interest rates on traditional 30 year fixed mortgages also improved significantly.

Furthermore, as the interest rates on mortgage rates continue to improve, analysts still see more room for improvement on lender’s rate sheets. The end result has been borrowers and potential homeowners lighting up their mortgage broker and lender’s phone lines.

Mortgage Backed Securities Improve After Fed Statements
After a statement to purchase “large quantities of agency debt and mortgage backed securities“, the Fed also added that it would continue such actions as long as the conditions called for this response. For those of you keeping a close eye on mortgage rates, mortgage backed securities are one of the many followed indicators to evaluate trends and predictions for future mortgage rates.

If you’re unsure how the Fed’s Target Rate affects your mortgages, you can view this post which explains the correlation to interest rates on home equity lines of credit. As for traditional mortgages, the effect is usually not as direct, but today, homeowners were fortunate to see an improvement in rates quite quickly.

If you’re considering a home equity loan because of this recent rate drop, here are some resources that should help you shop around for a HELOC