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
 |
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 |
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.