The Federal Reserve announced this morning that it was cutting the federal funds rate by 50 basis points to 1.5%. This move was coordinated with other central banks worldwide in an attempt to shore up global financial systems.
The banks involved in the coordinated interest rate cut were the European Central Bank, the Bank of England, the Federal Reserve, Sveriges Riksbank, the Swiss National Bank and the Bank of Canada. Although Japan was not involved in the interest rate cut, the Bank of Japan expressed their support for this move.
Here is the Fed statement in full:
Release Date: October 8, 2008
For release at 7:00 a.m. EDT
Joint Statement by Central Banks
Throughout the current financial crisis, central banks have engaged in continuous close consultation and have cooperated in unprecedented joint actions such as the provision of liquidity to reduce strains in financial markets.
Inflationary pressures have started to moderate in a number of countries, partly reflecting a marked decline in energy and other commodity prices. Inflation expectations are diminishing and remain anchored to price stability. The recent intensification of the financial crisis has augmented the downside risks to growth and thus has diminished further the upside risks to price stability.Â
Some easing of global monetary conditions is therefore warranted. Accordingly, the Bank of Canada, the Bank of England, the European Central Bank, the Federal Reserve, Sveriges Riksbank, and the Swiss National Bank are today announcing reductions in policy interest rates. The Bank of Japan expresses its strong support of these policy actions.
Federal Reserve Actions
The Federal Open Market Committee has decided to lower its target for the federal funds rate 50 basis points to 1-1/2 percent. The Committee took this action in light of evidence pointing to a weakening of economic activity and a reduction in inflationary pressures.ÂIncoming economic data suggest that the pace of economic activity has slowed markedly in recent months. Moreover, the intensification of financial market turmoil is likely to exert additional restraint on spending, partly by further reducing the ability of households and businesses to obtain credit. Inflation has been high, but the Committee believes that the decline in energy and other commodity prices and the weaker prospects for economic activity have reduced the upside risks to inflation.Â
The Committee will monitor economic and financial developments carefully and will act as needed to promote sustainable economic growth and price stability.Â
Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; Timothy F. Geithner, Vice Chairman; Elizabeth A. Duke; Richard W. Fisher; Donald L. Kohn; Randall S. Kroszner; Sandra Pianalto; Charles I. Plosser; Gary H. Stern; and Kevin M. Warsh.Â
In a related action, the Board of Governors unanimously approved a 50-basis-point decrease in the discount rate to 1-3/4 percent. In taking this action, the Board approved the request submitted by the Board of Directors of the Federal Reserve Bank of Boston.
Information on Actions Taken by Other Central Banks
Information on the actions that will be taken by other central banks is available at the following websites:Bank of Canada  Â
Bank of England Â
European Central Bank
Sveriges Riksbank (Bank of Sweden)
Swiss National Bank (51 KB PDF)ÂStatements by Other Central Banks
Bank of Japan (65 KB PDF)Â
 If you have a sizable cushion to depend on in these hard times, as I hope you have built up over the years, then this means you are going to earn less money in interest from your bank.
We all pray that this rate cut and the many other dramatic actions taken by the Fed, the Treasury and Congress will keep this recession from turning into a depression.
We are still within range of an average recession and bear market, as the stock market is down 38% year over year. The cumulative average bear market loses 34% in value. As with all averages, sometimes the market loses less and sometimes it loses more. Let’s hope we are at the bottom and will be moving up from here.
The Federal Open Market Committee met yesterday and decided once again to hold the federal funds rate steady at 2%. Here is the statement they released to explain their decision:
The Federal Open Market Committee decided today to keep its target for the federal funds rate at 2 percent.
Strains in financial markets have increased significantly and labor markets have weakened further. Economic growth appears to have slowed recently, partly reflecting a softening of household spending. Tight credit conditions, the ongoing housing contraction, and some slowing in export growth are likely to weigh on economic growth over the next few quarters. Over time, the substantial easing of monetary policy, combined with ongoing measures to foster market liquidity, should help to promote moderate economic growth.
Inflation has been high, spurred by the earlier increases in the prices of energy and some other commodities. The Committee expects inflation to moderate later this year and next year, but the inflation outlook remains highly uncertain.
The downside risks to growth and the upside risks to inflation are both of significant concern to the Committee. The Committee will monitor economic and financial developments carefully and will act as needed to promote sustainable economic growth and price stability.
Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; Christine M. Cumming; Elizabeth A. Duke; Richard W. Fisher; Donald L. Kohn; Randall S. Kroszner; Sandra Pianalto; Charles I. Plosser; Gary H. Stern; and Kevin M. Warsh. Ms. Cumming voted as the alternate for Timothy F. Geithner.
It looks like inflation is too high for the Fed to feel good about cutting rates again, even though the stock market turmoil made them give another cut serious consideration. The previous rate cuts in the last 9 months have not really begun to affect the economy overall. It usually takes 12 months or more for an interest rate cut to make itself felt across a broad spectrum of the economy.
As inflation edges ever closer to 6%, I believe it is only a matter of time until the Fed starts raising rates again. If the economy stabilizes this will probably happen in the middle of next year.
If you are thinking about refinancing your mortgage, then the next 3-6 months will be the time to do it. With the federal takeover of Fannie Mae and Freddie Mac, interest rates have fallen in the last 2 weeks. Interest rate increases are on the horizon. If you refinance now, you will be glad you did 12 months from now.
Federal Reserve Lowers Fed Rate 0.5%
Filed Under Loans, Mortgage, News, Rates, Refinance | Comments Off
Just a couple of hours ago the Federal Open Market Committee decided to lower the Fed Rate and the Discount rate by 50 “basis points”. This means the Fed rate has gone down to 4.75% and the discount rate is down to 5.25%. This is the first rate cut under the chairmanship of Bernanke and also the first rate cut since early 2006. Here is what the Fed reported:
The Federal Open Market Committee decided today to lower its target for the federal funds rate 50 basis points to 4-3/4 percent.
Economic growth was moderate during the first half of the year, but the tightening of credit conditions has the potential to intensify the housing correction and to restrain economic growth more generally. Today’s action is intended to help forestall some of the adverse effects on the broader economy that might otherwise arise from the disruptions in financial markets and to promote moderate growth over time.Â
Readings on core inflation have improved modestly this year. However, the Committee judges that some inflation risks remain, and it will continue to monitor inflation developments carefully.Â
Developments in financial markets since the Committee’s last regular meeting have increased the uncertainty surrounding the economic outlook. The Committee will continue to assess the effects of these and other developments on economic prospects and will act as needed to foster price stability and sustainable economic growth.
Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; Timothy F. Geithner, Vice Chairman; Charles L. Evans; Thomas M. Hoenig; Donald L. Kohn; Randall S. Kroszner; Frederic S. Mishkin; William Poole; Eric Rosengren; and Kevin M. Warsh. Â
In a related action, the Board of Governors unanimously approved a 50-basis-point decrease in the discount rate to 5-1/4 percent. In taking this action, the Board approved the requests submitted by the Boards of Directors of the Federal Reserve Banks of Boston, New York, Cleveland, St. Louis, Minneapolis, Kansas City, and San Francisco.
Mortgage rate data from FreeRateSearch.com shows little difference between fixed and adjustable subprime mortgage rates.
Milwaukee, WI (PRWEB) May 31, 2007 — Consumers holding adjustable rate loans may be tempted to refinance with another adjustable rate loan for a smaller payment, but the savings are not worth the risk, warns mortgage rate search engine http://www.freeratesearch.com/ With an estimated $1 trillion dollars in adjustable rate mortgage (ARM) debt resetting in 2007, and about $650 million of that in subprime loans, many homeowners are at risk of refinancing into another risky ARM unless they know all the options available to them.
According to data released today by FreeRateSearch.com, the gap between the best subprime ARM and 30-year fixed rate loan is too small to justify the additional risk of the ARM. FreeRateSearch.com is a free website that allows consumers to search and compare multiple mortgage loan programs anonymously, and get custom rate quotes for any type of credit.
 If you are in a dangerous ARM because you didn’t know a decent fixed rate loan was available, don’t let it happen again  |
FreeRateSearch.com offers the following example* for a subprime loan customer:
Comparison of Best 2 Year ARM vs. Best 30 Year Fixed
Best 2-year ARM: 7.550% rate, $1,756.60 payment
Best 30-year Fixed-Rate Loan: 7.89% rate, $1,815.28 payment
The difference in payment between best 2-year ARM and fixed rate loan is only $58.58 per month, but the risk associated with the adjustable rate loan is significantly higher. [read more]
Peak Home Loans Limited Time Release
Filed Under Lenders, Loans, News, Rates, Refinance | Comments Off
Tampa, Florida (PRWEB) May 8, 2007 — Peak Home Loans announces a limited time home refinance loan program for people with less-than-perfect credit. Four out of five applicants that apply for a home refinance loan with Peak Home Loans can now qualify with 24 hour results. Borrow $100,000.00 for less than $365.00 per month, But, before applying, learn the top five mistakes people make when refinancing their home. The best advice is to “get the best deal while making an educated decision.”
These are the top 5 mistakes people make when refinancing their homes:
1. Choosing a home loan lender for the wrong reason (i.e., the lowest rate, your existing lender.) People choose home loan lenders for all the wrong reasons. Getting a low rate is important, but it’s not the only consideration. Lenders may offer the lowest rate but charge extra fees (loan fees, origination fees, copy fees) so that in the end you’ll pay more for the refinanced home loan even though your rate may be lower. The only way to protect yourself is to wait for the Good-Faith Estimate which should list all the closing costs. Compare the Good-Faith Estimates from a number of home loan lenders. But comparing Good-Faith Estimates is not the only story when you want to refinance your home. If time is important, you want to choose a mortgage company that is capable of acting quickly. Ask each company to give you their average closing time for loans similar to yours. Ask around among your trusted friends. Find out who refinanced lately and ask them what they thought of the company. Don’t assume that your existing home loan lender is any better than a new lender. Since most home loans are sold in the secondary market, everyone has to meet certain criteria, and your existing lender will probably require the same documentation as a new lender. However, once you have a commitment from a new lender, it doesn’t hurt to ask your existing lender to beat it. Often times they will.
2. Not getting everything in writing about refinancing your home loan.
Get everything in writing. No matter what the Loan Officer tells you, ask him to confirm it in writing. Don’t believe someone when they tell you that your refinance rate is guaranteed. Get it in writing.
3. Not knowing the appraised value of your home.
Many people go ahead and try to refinance their home without knowing the true value. There are many places you can get an estimate of the true value of your home for purposes of refinancing. Many Realtor sites have home value estimators on their site. For the price of listening to a mortgage company try to sell you a mortgage, you can get an approximate value for your home.
Check the recent sales in your neighborhood and try to find a comparable house in a comparable location. Or you can ask the appraiser to do a drive by and give you a verbal estimate of the value of your home. If it’s in the right ballpark, you can order a thorough appraisal. Know the value of your home before you seek to refinance your home loan.
4. Not doing the math when refinancing your home loan.
Do the math. Refinancing your home has a cost. You need to see what the cost is, and then determine how long you are going to stay in your home. For example, if you are going to stay in your home for 5 more years, and the cost of refinancing your home is $5000, you need to save at least $1000 a year in order for the deal to make sense. If you only save $50 a month as a result of refinancing (that’s $600 a year), you’ll be loosing money.
5. Not considering a 2nd Mortgage.
When you refinance your home, you are refinancing the total amount. Suppose you have a home that is now worth $400,000, and you only owe $250,000 on the home and you want to take out $50,000. If you refinance and take out $50,000 in cash your new loan may be for $310,000, ($250,000 owed + $50,000 cash out + a total refinance cost of 3% or $10,000). It may be better to take out a 2nd mortgage for $50,000 and pay a slightly higher interest rate and slightly higher points, but only have a basis of $50,000 instead of the $310,000.
Peak Home Loans has been assisting an average of 3000 clients a month with less-than perfect credit obtain mortgage and home refinance loans since 2001.
Robert Myers,
Managing Partner,
Peak Home Loans LLC
4134 Gulf of Mexico Dr., Suite 201
Longboat Key, FL 34228
(877) 959 – PEAK