ANCHOR: The Federal Reserve is meeting today to decide whether or not to lower interest rates and by how much.
ANCHOR: Our Money and Real Estate Expert Ilyce Glink is here with the word on how the interest rate decision will affect the economy and you.
ILYCE: With economic indicators continuing to point toward a recession — if we’re not already in one, as some economists think — the Federal Reserve is deciding what kind of jolt the economy needs to get going again. Some folks on Wall Street say if the Fed decides to leave the federal funds rate where it is, or only drops rates a quarter of a point, the market will dive. Others are betting that the Fed will drop rates a half point. Those who are most optimistic say the Fed will drop rates three-quarters of a point, or even one full percentage point. Let’s take a look at where mortgage interest rates are today and where they might be once the Fed takes action.
Interest Rates Today
30-year fixed rate loans 7.16 %
15-year fixed rate loans 6.72 %
1-year ARM 6.4 %
Source: HSH Associates.
ILYCE: Most analysis seems to feel the Fed will cut rates by a half point. If that happens, mortgage interest rates will probably stay where they are, or go up slightly. The reason they might go up slightly is that the bond market has already anticipated the half-point cut. If we get it or get less, like a quarter point cut, rates will move up. If we get a three-quarters point cut, rates may drop down slightly. Let’s take a look at the best interest rates available today:
Best Rates Available Today
30-year fixed rate loans 6.25 % 1.50 points
15-year fixed rate loans 5.75 % 1.25 points
1-year ARM 6.00 % 0 Points
30-year Jumbo (to $1 million) 6.5 % 1.75 points
ILYCE: The problem with depending on lowering interest rates to boost the economy is that you can end up like Japan, which basically lends money for almost 0 percent interest. I don’t think Greenspan is going to get himself in that position which limits what he can do. So we’re limited to how much interest rates are going to fall from here.
ANCHOR: Question of the day: Is now the right time to refinance?