Dennis' Mortgage Blog

Important to note that along with rate cut the remarks out of the meeting were that "the Committee judges that some inflation risks remain, and it will continue to monitor inflation developments carefully."  This is the Fed Governors telling us, "we are cutting the rate because most of the cut is priced into the markets, to not cut would send them into turmoil.  We are still concerned about inflation and when the current credit crunch is alleviated we may raise the rates again if inflation pressures persist."  In other words: we just made this cut, and made it big, so do not bet on us making another one.

What does it mean?  In the short term rates are going up as the stock markets take off on the news that credit is a bit cheaper.  In the next few days we may/could see mortgage rates descend a bit to a new range a bit below the current range.  In the meantime those with equity lines just saw their interest rates drop half of a percent.

I am not convinced that this rate cut will loosen up significant money on Wall Street for investment in non-conforming mortgages, which is what we need in California.  There has been plenty of liquidity in the investment markets, what there has been is a lack of confidence.  While borrowing money is cheaper and may create a better yield on the risk/reward decisions, it has to be seen whether the cheaper funds boost confidence to invest in jumbo mortgages in Long Beach, California.

If you have any questions or comments please do not hesitate to contact me.