![]() |
Short-Term Interest Rates on the Rise; Adjustable Rate Mortgage Holders Prepare for Increase in RateInterest rates are on the rise and many home owners who have adjustable rate mortgages may see increases in their forthcoming annual adjustments. Federal Reserve Chairman Alan Greenspan made it clear in 2004 that the Federal Reserve would be increasing short-term interest rates at a "measured pace." With the US Dollar at its weakest point in seven years, oil prices unstable and the evaluation of other economic indicators, the Fed Funds Rate was hiked seven times from 1.0% to 2.75% since June 2004 in an effort to curb inflation. Some economists believe it won't stop until the Fed Fund Rate hits 4.0%. Consumers with revolving debt accounts tied to the prime rate have seen the effect through rising interest rate charges, as the prime rate always rides 3% above the current Fed Funds Rate. Mortgage interest rates are affected indirectly by these changes. An increase in the Fed Funds Rate has an impact on financial markets as a whole, but mortgage rates may go up or down based on the perception investors have of current economic statistics and their reaction to the Federal Reserve's after-meeting statements. In general, when economic data indicates we have a slow-down occurring in our economy, investors tend to sell off stocks and reallocate that money to the safe haven of bonds and mortgage-backed securities. The purchase of mortgage-backed securities drives interest rates down. When economic data says there is growth in the economy, the stock market typically rallies and mortgage-backed securities sell off to fuel that stock market rally. This drives mortgage interest rates up. Our current market reflects the reaction of investors reading between the lines on comments made by the Fed, and mortgage interest rates are going up. This will have an affect on home owners with adjustable rate mortgages (ARMs) tied to indexes that are based on short-term interest rates. This includes the 11th District Cost of Funds, 12-Month Treasury Average (MTA), London Inter Bank Offering Rates (LIBOR) and others. This doesn't mean that everyone with an adjustable mortgage is in trouble right away. Some indexes are more volatile than others. COFI moves much slower than other adjustable rate indexes, while the LIBOR fluctuates with more volatility. But remember, when an ARM adjusts, the new interest rate is a sum of the borrower's fixed margin plus the current rate of the index the mortgage is tied to. Consumers who foresee paying an interest rate that is significantly higher may want to consider refinancing to take advantage of the stability of a fixed rate mortgage. This is also a good time for borrowers who started out in an adjustable rate loan due to a poor credit score to transition into a fixed rate loan if they can. Once a track record of making mortgage payments on time and in full has been established, this should have a positive effect on the credit score and there's a good chance the borrower may now qualify for a loan with a lower interest rate. As with any decision to refinance, it is important to take the terms of the existing loan, the cost of the new loan, and the borrower's long-term needs into consideration. A qualified mortgage professional should help weigh out the options by providing a clear assessment of available loan programs for the consumer. Mical Johnson is affiliated with Rock Financial, Inc., a Licensed Correspondent Mortgage Lender, Florida Department of Finance. Free consultation and a 10-Year History of ARM Indexes are available by calling. You my also obtain a free copy of Mr. Johnson's Home Buyer Handbook by contacting him at http://www.TampaMortgageGuy.com. He is also a contributing author at http://www.Debt-Free-Personal-Finance.com
Today's refinance rates move higher – August 8, 2022 Bankrate.com Mortgage Refinance Volume Plunges 80% -- but Could You Benefit From a Refinance Today? The Motley Fool Current National Refinance Rates: July 18, 2022—Current Refinance Rates Drop – Forbes Advisor Forbes Today’s 30-year mortgage refinance rates dive below 5% for first time in 42 days | August 1, 2022 FOX 6 Milwaukee Impac Mortgage Slashes Staffing Levels By 48% – NMP National Mortgage Professional Top Originator Spotlight: Inlanta Mortgage's Dave Hartman Mortgage Professional 5 Tips For Paying Off Your Mortgage Early House Digest Title company 2Q earnings are a mixed bag National Mortgage News I Have an 808 Credit Score but It Took 3 Tries to Refinance My House Business Insider A Friend Asked Me to Cosign a Loan. Here's Why I Said No The Motley Fool Should You Take This Piece of Dave Ramsey Advice Now That Mortgage Rates Are Higher? The Motley Fool Trends in Mortgage Refinancing Activity Freddie Mac Today’s best mortgage refinance deal? 15-year rates are the lowest available | June 6, 2022 Fox Business Best Mortgage Refinance Companies of July 2022- Compare Refinance Rates | U.S. U.S News & World Report Money Refinance Calculator Bankrate.com Mortgage refinancing: Should you do it? Mortgage Professional Today’s 30-year mortgage refinance rates hold, but for how much longer? | April 4, 2022 Fox Business When to Refinance Your Mortgage Business Insider Today's mortgage refinance rates: 3 key rates sink to money-saving levels | Jan. 24, 2022 Fox Business Today’s mortgage refinance rates: 20-year rates hold below 5% for fourth straight day | July 27, 2022 Fox Business Home refinance options for 2022 The Mortgage Reports Still time to lock in lower rates: 30-year mortgage refinance rates edge down | March 4, 2022 Fox Business Today's 30-year mortgage refinance rates hold steady, 3 others inch back up | March 25, 2022 Fox Business Today's refi rates fall – July 18, 2022 Bankrate.com Refinancing a reverse mortgage: What to know Fox Business Today’s Mortgage Refinance Rates, July 19, 2022 | Rates Stay Lower with Federal Reserve Action Looming NextAdvisor How to refinance your mortgage, a step-by-step guide The Washington Post Today’s mortgage refinance rates hold with 30-year rates resting under 4% | March 1, 2022 Fox Business Savings window opens wider: 30-year mortgage refinance rates dip again | March 31, 2022 Fox Business Today's mortgage refinance rates hold at bargain levels for 30- and 20-year terms | Jan. 7, 2022 Fox Business
|