Home Loan Interest rates - Are they going down?

The fed's been cutting the interest rate, right? This was suppose to help with the housing and credit crisis? I'm seeing the relief in my student loans, but...

I've been watching the interest rates to see if it would be worth it to refinance my house. Currently I have a 6.2% fixed rate, which I got in May of 07.  The federal interest rate has been cut 3-4 times since then, sooooo... Why then are the mortgage rates staying about the same? This morning it was 6%, that's not a huge difference....

I'm just confused...?? Can someone educate me?

The interest rate cuts by the fed affect the federal funds rate, which isn't tied directly to mortgages.  Also consider the state of the mortgage industry.  That said, they have dropped a bit, just not by halves of points like the fed funds rate drops.

I read a good article on yahoo a few months back explaining this, but I can't find it now!

I was looking into refinancing also, but the costs to do it were higher than the money I would have saved, so I skipped it.

Because the fed rates only affect lending between banks.

The interest rates on 30yr fixed (for instance) are a reflection of what bond investors think will happen in the future.

If you believe we are headed for serious inflation (which many believe and we're already seeing evidence of now) why would you as a lender want to give someone a big chunk of your money for only 6% interest when those rates wont keep up with inflation essentially allowing people to leverage your money against you?

Rates aren't going to drop no matter how much the fed cuts their rates to the banks.

The other two posts have it covered for the most part.  The Fed has no *direct* bearing on mortgage interest rates offered by banks most of the time.

Mortgage interest rates are driven by the sale of mortgage backed securities.  When that market is hot, the interest rate will be driven up.  Since the housing market is pathetic right now, interest rates have seen a dip. 

As to rates going down further, it would depend on how long mortgage backed securities are out of fashion. 

makes sense...thanks guys!

no

Can I just thank the US for those rate cuts, which have lowered my student loan interest rate by 1.25 percent since I took it out two years ago? I appreciate that, considering the six-figure nature of the loan.

And I'm really looking forward to renegotiating my mortgage in a couple of years - I think that rate will go down too (no fixed mortgages for very long here).

You are kidding yourself if you think mortgage rates are going to drop trust.

With the exception of the late 70's early 80's double digit 30yr fixed rates, the historical floor is around 8%.

Borderline retarded fiscal policy is why it went below that (actually it isn't even borderline) but it's not going to stay there and I'm betting we'll see the double-digit dance again if we manage to dodge stagflation.

^ If that's true, then I'm now really glad I'm locked in at 6.2%

I found they were low.  We are thinking about refinancing our 30 year fixed (we have 27 years left to pay) to a 15 year fixed, add our Home equity loan and our debt from our kitchen renovation.  The rate wasn't much lower on the house, but a ton lower on the HE and the debt.

@8

it just means that the value of your house is going to tank although massive inflation from the debasement of the dollar might prop it up.

I'm not really too worried about that. I live in an area where housing is very affordable and appreciation is slow. We never had a "boom" like CA or FL, and home value is WAY below the national average. I do believe it'll go down, but there's just not that much to "tank", so to say.

My house (rather, apartment) was cheap enough that I honestly want the market to tank further, because the 25% (say) that I'd lose on my place would be more than offset by the 25% drop in the next place I'll buy, after residency, when my income will be, from my perspective, ginormous. :)

And my current mortgage is at 5.3%. I think Canada is different, because as I said, you have to renegotiate it regularly (my mortgage was 4 years - aka med school - but the standard is 5 years, which has a slightly higher interest rate; and the longest available is 10 years - all amortized over 25 years of course).

I feel better at thinking that lower-cost places tend to tank less (my city is still sort of undervalued compared to other cities its size) and lower-cost homes tank less too - there will always be someone who can afford my little place. But those gorgeous Victorian townhouses in Westmount have fallen by nearly 20% in the past year or so... heh heh, keep dropping, my pretties, Mommy can wait...

Is it only vancouver that's the home of the 40yr fixed mortgage?

I'm pretty sure it's not fixed - they just extended the amortization period to lower the payments. Even 30 years amortization is new for Canada, the standard has always been 25 years (no tax credit for mortgage interest up here). But yes, some overpriced areas like Vancouver introduced the longer amortization. You still have to renegotiate every few years, though. (Like... my mortgage is 4 years; amortized over 25 but paid biweekly so winds up being 21). So in Vancouver, land of the stupidly expensive home (single family average price is over 500K I think), it winds up being 5 years (that's the "standard" length in Canada) amortized over 40, meaning you'd have to renegotiate the bugger eight times. I can't even imagine what that would be like.

And I'm hoping that my next mortgage rate will be lower - my student credit line, which started out higher than my mortgage rate, is now lower than it - so maybe there's hope.