Prime Rate Cuts – Yummy!

Prime Cuts

The recent Fed cuts in Federal Funds Rate another .5% on Tuesday, January 29th, on the heels of their surprise .75% rate cut just eight days earlier has made a huge drop in the prime rate. This immediately affects people who have home equity lines of credit. These typically are based on the prime rate and have adjusted downward a total of 1.25% in just eight days. And of course all this talk about rate cuts has spurred a little refinance boom with applications jumping 22.1% nationwide.If you are sitting on an ARM, or didn't jump into the refinance boom, this might be a great opportunity for you. If you still have 80% left of the life of your loan, and have good credit, it's probably worth having a discussion with your loan officer.
What a difference a year makes
Prime Cuts January 30, 2008 One Year Ago Change
Prime Rate 6.00% 8.25% -2.25%
Federal Funds Rate 3.00% 5.25% -2.25%
3-Month LIBOR 3.11% 5.36% -2.25%
3-month Treasury 2.20% 5.13% -2.93%
10-year Treasury 3.65% 4.80% -1.15%
30-year Treasury 4.33% 4.91% -0.58

HGX Index

Another good sign for the housing industry that is often overlooked is the HGX index. This is a stock index of the largest national home builders and it has taken quite a beating over the last six to twelve months. But if you look at what it has done since mid-January, you can see that the market believes we are going to have a big revival in the near future. These indexes tend to reflect forward-thinking earnings that are 6-12 months out. But clearly investors are putting their money on a housing recovery, not a recession as the media keeps touting.