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How Will the Federal Reserve Rate Cut Affect Mortgages?Aired January 3, 2001 - 2:04 p.m. ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
NATALIE ALLEN, CNN ANCHOR: A slowing economy does gave at least one perk: Mortgage rates have been falling. Lenders, anticipating an interest rate cut by the Fed which came, as you just heard the past hour, had already eased their rates.
Besides that, the bond market is flush with cash as investors have moved money out of stocks. Rates peaked in May, topping out at around 8.5 percent. After steadily falling for half a year, they really picked up downward speed as 2000 came to a close.
Today, the national average for a 30-year fixed rate mortgage is hovering at around 7 percent, and that's the lowest in about 18 months. Is it time to lock in or to refinance?
Stephanie Auwerter joins us from New York. She's with SmartMoney.com. Hi there, Stephanie.
STEPHANIE AUWERTER. SMARTMONEY.COM: Hi.
ALLEN: First let's talk about what we just learned about what Alan Greenspan has done. Is that effect these nice mortgage rates that people could get?
AUWERTER: Probably not too much. The market or the mortgage rates had already really priced in a Fed cut. Now granted, this did come a bit sooner than a lot of us had anticipated, but that said, that general trend downward was anticipating a Fed cut. So, it came a bit sooner but it's probably not going to affect mortgage rates right now.
ALLEN: So, if you're sitting at home wondering, is this a good time for me to consider refinancing? How do you figure that out? What are the questions to ask when you're talking with someone?
AUWERTER: What you really need to do is you need to crunch the numbers, and on our Web site, SmartMoney.com, for example, we do have a worksheet that will help you do it. You need to evaluate what you're paying right now versus what rate you can get today. As you mentioned, the rate right now for a 30-year fixed is 7.2 percent, which is really good. and much better than anything we've seen certainly since May of 2000.
ALLEN: What are some of the best/worst case scenarios in the next few months that we could see as far as mortgage rates? AUWERTER: Well, you know, mortgage rates are going to continue to trend down if the Fed continues to cut; if the yield on the treasury -- or yield on the treasury continues to fall. So, that might be bad in other scenarios but as far as your mortgage rate is concerned, it could be good news.
ALLEN: OK, Stephanie Auwerter, we thank you for talking with us. That should be exciting news for people trying to start out the new year looking for a little more money. Thanks a lot, Stephanie.
AUWERTER: Thank you.
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