Morgage rates going down?

[sunnydazed]

I heard something on the news today about interest rates, but wasn't sure if I heard correctly. Are interest rates NOW at their lowest in 40 years, or are they GOING to go down to the lowest in 40 years soon? Hubby and I are getting ready to refinance and wanted to be sure we were getting the best deal! Thankyou! :)

[chort1313]

i have been looking at refinancing myself, but i heard the rate has been pretty steady the past month. I may not be right. Oh, here's the article:


Fed leaves rates alone

But two members dissent, voting for rate cut; 'bias' still tilted toward economic weakness.
September 24, 2002: 3:44 PM EDT



NEW YORK (CNN/Money) - A divided Federal Reserve held interest rates steady Tuesday, saying the U.S. economy still is at risk of weakness and citing uncertainty about the economic impact of a war with Iraq.

As widely expected, Fed policy-makers decided to leave their target for the federal funds rate, an overnight bank lending rate, unchanged at 1.75 percent, the lowest level in more than 40 years. The Fed also left its symbolic discount rate unchanged at 1.25 percent.

In an unusual development, two of the 12 policy-makers -- Fed Governor Ed Gramlich and Dallas Fed President Robert McTeer -- dissented from the decision, saying they would have preferred a rate cut. It was the first dissent among the central bank's policy-makers since Thomas Hoenig, president of the Kansas City Fed, objected to a rate cut on Dec. 11, 2001.


"I really don't read a lot into [the dissent]; it doesn't mean that's the direction policy is going to head," said Gary Thayer, chief economist at A.G. Edwards. "Some people interpret the risks differently than others, and that's what's happened this time."

Other observers, however, noted that such unusual dissent -- it was the first time two policy makers had objected to a Fed decision since May 1998, when two members wanted the inactive Fed to raise interest rates -- indicated there was a strong possibility the Fed would lean toward cutting rates at its November meeting.

"They still feel there's enough activity in the economy that they don't need to cut yet," said Robert MacIntosh, chief economist at Eaton Vance Management. "Come November, if things are still as sluggish as they seem to be, they'll have to do something then."

In the closely watched statement accompanying its decision, the Fed again said that, while its monetary policy was already providing plenty of stimulus, the economy is in greater danger of additional weakness rather than inflation.

"The information that has become available since the last meeting of the Committee suggests that aggregate demand is growing at a moderate pace," the Fed said in its statement.


The Fed also referred to uncertainty due to "the emergence of heightened geopolitical risks," a nod to growing worries about the economic impact of a war with Iraq.

"Like the rest of us, business leaders cannot figure out what will happen if war breaks out, and making business plans in such an unclear environment is quite difficult," said Joel Naroff, president and chief economist of Naroff Economic Advisors.

The Fed's decision was widely expected on Wall Street, but stock prices fell after the decision anyway. Treasury bond prices rose.

Mounting evidence of weakness
The fed funds rate is the basis for many banks' prime lending rates and affects the cost of borrowing for consumers and businesses. The central bank cuts rates when it wants to stimulate the economy and raises them when it wants to slow the economy down and fight inflation.

It cut rates 11 times in 2001 to fight a recession that the National Bureau of Economic Research said began in March of that year. Low rates also have helped keep mortgage rates low, fueling the housing market and boosting homeowners' equity, which has helped keep consumers spending.


Earlier this year, most economists thought the Fed would be raising rates by at least a quarter percentage point in August.

That expectation was turned on its head by persistent stock market weakness in June and July, raising fears that the weakness could erode consumer and business confidence and slow the economy down again.

Since then, economic data have been mixed, showing declines in consumer confidence, some strength in consumer spending on automobiles and homes, mixed retail sales, faltering industrial production and growing new weekly claims for unemployment benefits, even as the unemployment rate has dropped.

If the weaker data begin to prevail between Tuesday and the Fed's next policy meeting, scheduled for Nov. 6, another rate cut could be on the way.


"If spending holds up and job gains continue, even if they are nothing great, rates will likely not be reduced," Naroff said. "If the labor market turns negative and households put away their wallets, the [Fed] will undoubtedly react."

The Fed's statement seemed designed to specifically avoid promising a rate cut -- it did not say that policy makers were "closely monitoring" the economy, verbiage that's been taken in the past to hint at a cut possibly being made between policy meetings.

But the implied yield on the federal funds futures contract, -- a closely watched gauge of what traders are betting about the Fed's monetary policy -- indicates traders think there's an 88-percent chance the Fed will cut rates by its Nov. 6 policy meeting.

[sunnydazed]

Thankyou for the information chort! I just don't want to refinance and then it go even lower a couple days after the paperwork is finished! That is the kinda stuff that happens to me! ;)

[chort1313]

i know what you mean! i have checked all of my options and am not going to refinance at this time. I will have to refi in another year any way. Just to cover my closing costs if I were to refinance right now I would have to live in this house another two years.. which i'm going to, but it doesn't makes sense to me to refi now and again in a year.

good luck and shop around for the best deal!

[sunnydazed]

Thanks! I am wondering after that story you posted if I should wait until after November 6 to refinance if the rates go lower? I hope they go lower and not higher! It always feels like a gamble. :rolleyes:

[chort1313]

Yup, you just never know!!! It just depends on your rate now, the rate you will get, and if you're going to be in the same house that long to recoup your closing costs (if any). I figured it out with 3 different rates! It's always a gamble though. Have you considered an ARM? I'm most likely going to do that when I refi next year.
The time to refi was right after Sept. 11-----I tried to do this but the company I was dealing with lied to me about closing costs and it was going to be $4000 instead of the $800-1000 they told me! b@stards! Whenever I call someone now I tell them up front what happened to me so we don't waste each other's time. :rolleyes:

[sunnydazed]

I would be so upset at that company! That is a lot of money for them to be messing with. What type of paperwork warrents $4000? Sheeshk!

[chort1313]

Ohh you know just lil things here and there add up! I was super p!ssed! aaaahhhh well.. Live and learn.. good luck sunny! Chort must mow down some two foot tall grass! see ya! :)

[sunnydazed]

Have fun tackling that lawn! I am sitting at work thinking about being home! ;)