Feds just cut rates, should I refinance?

This is a question we get asked a lot, especially lately. The media has done the mortgage industry an injustice by promoting this without telling the whole story. What are even worse are the unscrupulous mortgage companies that try to advertise on the same lines, “Feds just cut interest rates, NOW is the time to refinance!”

Is a Fed rate cut really good news for mortgage rates? The answer may be surprising. The Feds can only control the Discount Rate (The discount rate is the interest rate charged to commercial banks and other depository institutions on loans they receive from their regional Federal Reserve Bank’s lending facility–the discount window.) and the Fed Funds Rate (The federal funds rate, also known as the “fed funds” rate, is the interest rate charged when banks lend funds to one another. This is a short-term rate, or a rate that is two years or less in maturity.). This is very different from mortgage rates. Mortgage rates are affected by investors of mortgage-backed securities (Bonds). So our answer is no, if you have just read that the Feds have cut rates then it is historically not a good time to refinance.

So when is a good time to refinance? Only a professional Mortgage Advisor can truly help you with that question. One who watches the Stock Market and has their finger on the pulse of the industry. We pride ourselves in our ability to save our clients money by advising when and when not to refinance based on historical indexes and Bond Market activity.

If you have additional questions we welcome your calls (360.551.1819). Thanks for taking the time to visit.