Dec 14 2007
ARM rate resetting? Why Fed rates may not cut it.
So many Adjustable rate loans are on the verge of resetting. The onslaught of foreclosures can send the economy in a downward spiral yet again, but the real story concerns you and me personally. While we care about the economy as a whole, we care even more about keeping our homes and providing shelter for our children.
The fed recently lowered the short term borrowing rates a quarter point this week to help to try and do its part to relieve the subprime crisis. Lowering this rate is good for some, who seek to refinance, but is it good for you?
Does the fed rate cut help you?
Does the fed rate cut help you? Maybe. Many subprime loans, 99 percent of them (and 38 percent of Alt-A loans), are based on the LIBOR rate. The LIBOR rate, or London InterBank Offer Rate, has not been reduced more than a quarter percent in the last few months. Europe has a both a strong currency and strong economy, so there is little incentive for the LIBOR rate to be reduced.
If your loan originates from a lender that is funded by US backed funds, then you may see a decrease in the borrowing rate as you refinance. Good luck.