Personal Finance QuickTake: Fed Cuts Rate 1/2%

At their regular scheduled meeting today the Federal Reserve made another 1/2 point cut. The market reacted by jumping 200 points only to fall back down.

The Fed also made it clear that they will continue to make cuts in order to stimulate the economy. This cut follows the surprise 3/4% cut that just happened.

Dual edged sword here, the cuts will mean that anyone with a rate pegged to the Prime Rate will see lowered interest payments (nearly all credit cards). Mortgages and refinancing should go lower, although they are balanced out a bit by demand as well as how fast the Treasury Ten-Year drops.

The downside is that 4 is the new 5...Until rates go up we won't see a lot of 5% Savings deals, unless it is a lockup or new customer offer. Also CD offers will continue to go down.

Basically the government wants us all to spend our way out of the upcoming (or here) recession! For our personal financial needs we are going to do what we can to get our FICO score to 720 and refinance...How about you? Are you looking at refinancing or buying longer CDs to lock in rates?

(photo by AP)

Personal Finance QuickTake: Mortgage Refi Surge

The Mortgage Refinance market is heating up again. As rates drop, many are looking to lower their payment, or perhaps like me, want to move to a fixed loan from an ARM Loan.

The question is...when? It feels like rates will continue to fall for a bit as this housing bubble is taking away liquidity from people. Already, according to the article, nearly 37% of homeowners could refinace and lower their payments.

This is also due to the slow housing market. Homes just aren't selling as no one wants to buy a the top or middle of a bubble. People are staying in their apartments or renting longer believing that they will be able to secure a better deal later.

My neighborhood is a great example. It is a very new subdivision and we looked at three houses. The other two are still on the market a year later! Home builder are desperate to unload.

Mortgage companies only way to make up for the loss of new home sales is to push refinance harder. Everyday I recieve at least two refinance offers. Eventually this will be great for us. As my FICO improves (thanks to our budget work) and rates fall, I might even be able to keep the same house payment and have a fixed loan.

The savings to your budget can be huge if you lock in better rates, perhaps $50K or more in lifetime savings.

So look carefully, step more carefully and weigh in all of the outside costs, but for a lot of us it is becoming a good time to look at saving big money.