An article by CNBC described it this way.
"On days like this, I think it's important to go back to the ol' mortgage primer and figure out exactly what all this news means to you, to your mortgage, to your home equity line and to your home's financial future. I've said it before, and I'll say it again: the 30 year fixed is not tied to short-term treasuries.
Fixed mortgage rates are tied to long-term bond yields that move based on the outlook for the economy and inflation. And guess what? The long-term outlook for the economy isn't exactly rosy right now.
This week's rate cut does affect short-term adjustable rate mortgages, but not really as much as you might think. Why? Because this rate cut was already priced into the market, maybe not three quarter's point, but definitely a half-point. So, if you are facing a reset on your ARM, you're in much better shape today than you were just six months ago.
So does this cut stem the foreclosure crisis? Maybe a bit on the margins but not really, and here's why: the folks facing foreclosure because they can't make their monthly payments have no equity in their homes and no money to put down on a refinance.
While rates might be lower, this is a market where lenders and investors are much more aware of risk and will gravitate toward borrowers that represent less risk. So many folks will still find themselves in trouble. For people who are having trouble paying the initial rate on the loan, forget it. No help there.
As for those looking to buy a home, that is, get a new mortgage, while ARM rates may be lower, the mortgage landscape is still far far different tundra than it was just a year ago. You can't do a stated income loan anymore, and you can't do 100% financing. Tighter standards don't change with a rate cut.
And I want to add my two cents here about a home equity line of credit. Yes, the rates are lower now, but I really don't think that means we should all start using our homes as ATM's again, which is what got us all in trouble in the first place. This is a time to pay off debt, not to gather more. The housing market is still in trouble.
The statement from the Federal Reserve this morning: "incoming information indicates a deepening of the housing contraction as well as some softening in labor markets." We all know the price correction in housing is still underway with home prices across the nation (yes, I know, some markets worse than others) expected to fall further, so this is no time to put your home in more hoc. Just my two cents, which I'm putting in the bank as we speak."
If you are a cash buyer, now is a great time to be actively buying. As they say, cash is king!
In addition, if you seek a mortgage to buy a house and have impeccable credit, Life Is Good for you.