As expected the Federal Reserve lowered short term interest rates today. For the news story please click here http://articles.moneycentral.msn.com/Investing/Dispatch/071031markets.aspx. So why are interest rates rising? If you have paid any attention to my previous writings you will understand that the Bond Traders make moves prior to a Fed announcement to position to profit from any move the Fed might make. In this case, they took their positions last week starting on Wednesday when the consensus was a .25% rate drop. Today and for the next few days they will be trading and taking their profits off the table. While doing this the demand for the bonds will drop off and the yield or interest rate will rise.
So what should you do? Don’t worry about it! For most consumers .25% means less than $50 per month. Make your decisions based upon long term goals and work to eliminate the non tax deductable debt that you might have. There are still enough loan programs that you can offset that .25% by other means such as interest only products or even better yet the long forgotten but still the better than an adjustable rate mortgage the 2-1 buydown. http://www.investopedia.com/terms/1/2-1_buydown.asp
If the speculators are correct the Fed will make more moves in the next 60 days and if you are smart you will get a relationship with a professional Mortgage Banker who will manage your mortgage for you and let you know when you should take advantage of market movements prior to Fed actions. It is always better to be proactive than reactive!
For comments or more information on have your mortgage managed please contact Chris Scheer at cscheer@cornerstonestl.com or 314.223.9824.
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