WILL RATE CUTS RESTORE CONFIDENCE?

Some people will undoubtedly misconstrue today’s financial aid rate cut of 0.50% by Ben Bernanke and the FED thinking that it will lower it will lower the mortgage interest rates, when in fact the opposite could happen. Certainly the move was unprecedented and quickly followed by major central banks around the world in a move to stave off financial destruction. The cut followed the $700 billion rescue plan that no one is calling it a bailout anymore.

If confidence is restored in the stock market and financial markets, then mortgage interest rates will rise, because rates actually benefit from a lack of confidence in the markets causing them to drop.

For those people still hanging on to option arm loans that will be maturing soon, one would suggest converting them to 30–year fixed mortgages while the rates are still low. (Again, coming from New England and owning property when the mortgage rates were 18%  and higher, the rate would have to climb above 10% for it to look high to me.)

The point is that the time to convert may never be better and it is exactly what I will be doing tomorrow to get the 30–year fixed rate locked in!