Real Estate Finance Alerts

The FED Cuts Rates

The FED cut rates a half point to 1.5% this morning in a coordinated worldwide move and signaled additional rate cuts may be needed.  The futures markets priced in this move over the last few days as financial markets worsened.  I will send my usual updates on the futures markets as we move forward.

We will have to wait to see the immediate impact mortgage rates because most lenders don't post their rates until 10:00 am ET or later.  Keep in mind that rates can move higher initially and then lower over time.  

UPDATE 12:30 am ET - Rates began the day relatively flat with most lenders, but moved over the last hour with many lenders repricing slightly higher.  Again, this is not uncommon after a FED cut.  I think there is a good chance rates move lower over the next days/weeks.  However, there are a lot of factors at play and moves will remain quick up and down.

The Prime rate will move lower which will lower the rate on Home Equity Loans and other Main Street interest rates.  It will also allow banks to make more money because they can borrow for less.  While not a silver bullet, the rate cuts definitely help.

I expect markets and interest rates to remain quite volatile.  Many of you are close to your Target Rates... so keep in touch.

Other Positive Changes

While stock markets worldwide continued to move lower over the last week.  I want to point out additional positive changes since the last Alert.

1. The Paulson Plan passed, at least a fattened version.
2. Wells Fargo and Citi got in a bidding war for Wachovia showing banks are worth something rather than just the deposits in an FDIC bailout.
3. The Dollar remained strong against most currencies which is important in the face of possible FED rate cuts.
4. The FED announced it will buy Commercial Paper, the every day short term loans business use to fund their operations, which had dried up and dropped over 25% in the last few weeks.
5. The FED also announced it will deal directly with companies and bypass banks that have been unwilling to lend.
6. Australia cut their bank rates yesterday.
7. Other countries are enacting or talking about Paulson type plans for their banking systems.

While credit spreads and lending remain extremely tight, the above changes are positive factors and should help ease the strains on the financial markets.

Todd Huettner

Huettner Capital

303-758-7402

todd@toddhuettner.com

www.huettnercapital.com