Fed just lowered interest rates another quarter point...
 

do any of you mortgage brokers have any inclination how this will effect long term mortgage rates tomorrow?

Can I add to Shane's question for you mortgage types?
I close on my new house in 3 weeks. Obviously, I already have a rate locked. If it does inded go down again, what can I do about it? Anything, or am I stuck with what I have?

I'm not a mortgage broker and I don't play one on TV either but...

I wouldn't worry too much about rates going lower.

Fixed rate mortgages are based on the U.S. treasury bond market and not based on the federal funds rate (the rate that was lowered today and is the rate at which banks loan one another funds). The initial reaction in the treasuries market is that yields went up slightly so mortgage rates shouldn't drop tomorrow morning. Heck, they might even go up a little. If you've already locked in a great rate sit tight and enjoy.

I understand how the fed funds rate works etc.. I also know that a friend at M&T Mortgage called me and said they expect rates to be lower in the AM. I am a full point lower now than when we originally financed and could be another point lower tomorrow than what are current rate is. He said they are thinking rates could drop 1/8 tonight.

I am in the process of refinancing my house at the moment. I had a rate of 6.75% and am locked right now at 5%... if the rates go any lower I may just see if they will lower it before we close on the 16th.

Good luck on getting your mortage rates down. My concern is the money markets, we are currently paying 70 basis points and would expect to see it drop below 50 basis points over the next several weeks. Some of the money market funds are already on the verge of losing money and their future is questionable with this latest rate cut. If any of them start trading at less than $1.00 I am concerned that this may do more damage than the Federal Reserve expects.

Larry,

Ahhh, the "breaking the buck" scenario. I would beg to differ just a littel with your above comment in that they are really not losing money, they are still net positive on income, just they are not making as much. I too share some concern as the bond market has reacted negatively as expected. Once they venture into negative territory, all bets are off. What do you think UT? banks are your specialty.

Shane,

I guess a lot depends on how investors perceive the rate cut. If people think it will help the stock markets further recover, then wouldn't bonds sell off somewhat as the money shifts more into stocks? If this happens bond yields would go up and mortgage rates would go up too. I can't imagine mortgage rates can go much lower than they were a week or two ago.

TulsaLarry,

Good point on the money markets. The fed is pulling out all the stops in an attempt to stimulate the economy. If you don't own as much house, or houses, as you can afford you probably aren't content financially in the current economy. I wonder how big a long term problem we will experience when seniors deplete all their savings after previously being able to live simply on interest income.

Shane,

What about expense ratios on money market funds? If rates go to .5%, and expense ratios are in that range or higher they could actually lose money unless they lower costs to the investor.

Rob M you EXACTLY correct. 100% SPOT ON! Which is why I said they are still profitable just not as profitable as they once were. If they do not reduce their internal expense ratios they will no longer be able to support a price of $1.00 per share which is where they try to maintain themselves. I guess I am just not as articulate as you are.;) Sorry. I guess we were basically saying the same thing only you were able to do so more succinctly. Money funds have not yet hit the point where they are below a buck but they are sure wandering into that territory. As far as 30 year mortgage rates go, you are probably right in that I missed the absolute bottom last week as the futures market usually prices these factors into the equation. However, as of late 30 year rates have been fluctuating more than normal and I have spoken with a few people in that business that speculate that 30 year rates could drop a tad. I guess I am just hopeful. Sorry that I was not as clear as I could have been and thank you for doing a good job at clarifying that.:)