Home Equity Loan | California Current

Tag Archive for 'home equity loan'

How Did The Historical Fed Rate Cut Affect Your Mortgage?

Published

Heindrick

on December 17, 2008

in Home equity

. 0 Comments

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

(1 votes, average: 5 out of 5)

Loading ...

California Mortgage Rate Weekend Roundup

Published

Heindrick

on November 1, 2008

in Home equity

. 0 Comments

Federal rate cut
Earlier this week, the fed initiated another rate cut of 50 basis points to the federal funds rate, bringing it to a 5 year low of 1%. Remember, a drop in the federal funds rate means that it will be cheaper for banks to borrow money from other banks and the government. For you rate watchers, this rate cut has a stronger correlation with short term loans rather than long term loans such as 30 year fixed mortgages.

While dropping rates are usually good news for consumers, a drop in the fed rate cut is unlikely to guarantee any drops in traditional mortgage rates. Instead, consumers will most likely notice these rate cuts to affect the interest rates on short term loans such as car loans, credit cards, home equity lines of credit. In addition, the fed rate cut also impacts consumer cash such as the interest paid on savings accounts, money-market accounts, and certificate of deposits.

Bottom Line: The Federal Reserve issued this funds rate cut in hopes of stimulating our economy by making credit available at even lower rates.

Woman Chains Herself to Foreclosed Home In California
Down south, a struggling homeowner chained herself to her home after living there for 19 years. Her story echos many of the problems homeowners have had with adjustable rate mortgages in California. During the housing boom, ARM mortgages were rampantly advertised as low rate & low payment monthly mortgage options; with many unaware of the possible consequences in the future. Unfortunately, this woman is facing foreclosure because of her adjustable rate mortgage and has responded with a desperate move to save her home.

Bottom Line: If you are having trouble with your mortgage, your best move is to speak with your lender as early as you can. In addition, there are helpful foreclosure avoidance resources on CalHFA , HopeNow, and even CMR.

(9 votes, average: 4.89 out of 5)

Loading ...

What Does Today’s Fed Rate Cut Mean for Mortgage Rates

Published

Heindrick

on October 8, 2008

in Home equity

. 0 Comments

This morning, the Federal Reserve cut the fed funds rate by half a percentage point to 1.5%. Today’s rate cut is making more news than usual because it was done in coordination with banks around the world.

Why the Rate Cut?
When the Fed cuts interest rates, it eventually trickles into the economy with hopes to rejuvenate spirits during this tough time. Essentially, by reducing these key interest rates, it becomes less expensive for consumers and businesses to spend money. Remember that the fed funds rate generally has a direct correlation between credit cards, automobile loans, business loans, and home equity lines. As for mortgage rates, the effects are a bit tougher to predict.

Fed Rates and Mortgage Rates
Historically, a reduction in these rates will eventually yield to lower mortgage rates - but this is no guarantee. In fact, during our last round of rate cutting, thirty year fixed mortgages saw an initial increase in mortgage rates. As of right now, investors are wary of investing in mortgage debt because of the recent toxic mortgages that have been plaguing banks. It is also worth noting that the current spread between mortgage rates and the fed funds rate is unusually high.

Global Rate Cut and Fears of Inflation
In this past year, there were a series of rate reductions which brought us to a 2% fed fund rate seemingly overnight. It’s been awhile since we’ve seen another rate cut and the reason is primarily due to fears of inflation. Well, people are still worried about inflation, but as of right now, this mortgage crisis has presented greater problems at hand. In order to uplift this economy, without exacerbating inflation fears, central banks around the world have cut their rates at the same time. These central banks include banks in the UK, European Union, Switzerland, Sweden, Canada, and China.

Back in August, I had written a post titled “Next Move For Fed Fund Rate Will Be an Increase“. And here we are today. So what does this all mean? We’re starting to see the mortgage crisis spread well past localized markets. The increase in foreclosures in California isn’t just affecting California. Its reach has spread well past the U.S. Economy and into our global economy.

Had their not be a worldwide central bank rate cut, the fed fund rate would have likely stayed at 2% due to inflation fears. But the crunch is just too strong, and something had to give. For those of you who followed the series of fed rate cuts, you should know by now that the fed fund rate is tied directly to home equity loan mortgage rates. While this rate cut comes during a tough time in our economy, it may also be the right time for you to looking into relatively cheap home equity loans.

Quick Links:

New York Times - Q&A about Fed Rate Cut

The Guardian - See What Economists Have to Say About Today’s Cut

(5 votes, average: 4.4 out of 5)

Loading ...