Mortgage Lending Made Simple

 Photo Courtesy of skippy13

If you are considering refinancing your mortgage, now may be the time rather than waiting for Fed to lower rates. If you wait, you may be in for a rude surprise. When most people hear that Fed is considering another cut to interest rates, they think that means that mortgage rates will be going down. That may not be the case as explained in this article from CNN Money.

“NEW YORK (CNNMoney.com) — Bond prices fell Thursday after Federal Reserve Chairman Ben Bernanke said the U.S. economy will continue to struggle and suggested that the central bank is willing to cut interest rates further.”

While a Fed rate cut does usually result in a reduction in Consumer Interest Rates, it generally has the opposite effect on Mortgage Rates. Bond Traders see lower interest rates as a stimulus causing Inflation which is BAD for bonds and draws more money out of the Bond Market and into the Stock market. This effectively makes the yields on Bonds increase which drives Mortgage rates higher. With Fed Rate cuts on the horizon, it might be time to go ahead with your refinance plans.

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