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HomeMortgage Deception: "Fed Slashes Interest ...

Mortgage Deception: "Fed Slashes Interest Rate by a Half-Point! Refi & Save!"

Your Mortgage PuppetThere's a mortgage company advertising online with this deceptive headline: "Fed Slashes Interest Rate by a Half-Point! Refi & Save Today!"

How is this deceptive? What this mortgage company isn't telling you: the Federal Reserve Board doesn't control mortgage rates at all...it regulates the short-term interest rate that banks use to lend money to each other overnight. In fact, when the Fed acts to change the overnight rate, the effects are unknown until six months to a year later.

Since the Fed lowered their rate on September 18th, the 30yr fixed mortgage rate actually climbed .25%. Why is that? The simple answer is that the fixed rate is connected more closely to long-term investments, such as the 10yr Treasury Bond.

Will refinancing save you money? That depends. It's not about interest rate only. Other factors, such as how long you will be in the home and your credit, will have an impact on that. Patrion Mortgage, for example, was able to lower their shorter term portfolio ARMs. Today's basic rates on these, for example, are:

  • 5.375% for a 3/1 LIBOR ARM
  • 5.625% for a 5/1 LIBOR ARM
  • 5.875% for a 7/1 LIBOR ARM

These loan rates may or may not be useful to you. It takes a residential home loan consultant that cares to make sense of this.

So remember:

  • Don't believe everything that you read.
  • The Fed doesn't control mortgage rates
  • Work with someone that is trustworthy...and local.

Joey Aszterbaum is the Hemet Home Loan Guy and an active affiliate of the Hemet-San Jacinto Association of Realtors. To schedule an appointment to refinance or purchase real estate in Hemet or anywhere in California, email joey@joeyloans.com or call (951) 571-5751.

Patrion Mortgage is a division of Altura Credit Union, formerly Riverside County's Credit Union, and is a local, direct lender.

Posted Tuesday Sep 25
(09/25/07 04:54PM) — Lewis Poretz - Open Mortgage - Maryland Mortgage Expert

A classic case of media hype ----   what I have been doing all week - just like Ricky Ricardo use to say -  " Lucy, you got some splaining to do "

 Man, the press sure makes it tough on us in an already difficult market don't they?

(09/25/07 05:04PM) — Marchel Peterson Spring TX Real Estate E-Pro ABR

Joey, I just had this conversation yesterday at lunch with the lender I use.  Good Post!!  You care about your clients and it shows!!!

(09/25/07 05:09PM) — Hemet Home Loan Guy, Joey Aszterbaum

Lewis: So true! I guess I'm benefitting from the misunderstanding just by getting calls from folks, but the explanation ruins that "Christmas in September" feeling!  Thanks for coming by. 

Marchel: Thanks, Marchel.  It's so important that our clients talk to a knowledgeable local Realtor or lender to get the right info.  Take care!

(09/25/07 05:12PM) — Pamela Williamson Team Saint Louis, Missouri Real Estate

Hi Joey! Thank you for posting this. Remember when the news did just that...reported the news. This media hype is ridiculous. :)

(09/25/07 05:14PM) — Hemet Home Loan Guy, Joey Aszterbaum

Pamela: Agreed...but in this case the less scrupulous mortgage lending companies play up the misunderstanding. People are looking to us as experts and this misrepresentation hurts our creditability as real estate professionals.

(09/25/07 05:36PM) — Faina Sechzer - Princeton, Montgomery, Hopewell, NJ Real Estate Expert

Joey - i bet everyone was expecting the mortgage rates to go down. There are a lot of misconceptions out there, may be because rates change after Fed's moves, but as you said it's not directly related. Great educational post for potential borrowers.

(09/25/07 05:42PM) — Albuquerque Real Estate | Ashley Drake Gephart

Good information Joey. The media hype and misleading ads can only continue if the public is in the dark. The more honest and ethical agents and loan officers that blog the more informed the public will be. And that is good for everyone.

(09/25/07 05:47PM) — Hemet Home Loan Guy, Joey Aszterbaum

Faina: They most certainly were.  It seems that no matter what rates do, there's some online advertiser that says they're lower than ever.  It's a joke and needs to go away. 

Ashley: Thanks. More and more I'm focused on information and blogging and getting out of advertising.  When someone is advertising price there is always a catch.  I like 'branding' advertising.  Let a company be known by it's service and a good deal. Chances are, the "Low Price Leader" in any market is giving out inferior product, if they even keep their price promise. 

(09/26/07 11:25AM) — Eric Everett

Joey -  You're right on with the Fed rate myth.  Think about the last round of hiking rates.  How many points did they hike in total, 2?  2 1/2?  I know mortgage rates have gone up since then but evryone was asking themselves "why are mortgage rates steady while the Fed keeps raising??"  Pretty funny. 

(09/26/07 11:24PM) — Hemet Home Loan Guy, Joey Aszterbaum

Eric: Great to have you! Thanks for adding me and swinging by.  Everyone: Be sure to visit Eric's blog and comment...he's a newbie.

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