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Home Equity Loans: Prime Rate News

[Mar 12, 2010.]


Next FOMC Meeting March 16, 2010

This coming Tuesday, March 16, 2010, the Federal Reserve's monetary policy making committee will meet. The Federal Open Market Committee (FOMC), meets about every six weeks to decide whether or not to raise interest rates that can affect home equity loans. If the FOMC were to raise the Fed Funds Rate, it would affect the Prime Rate to which most home equity loans are indexed.

For many months the FOMC has stated that the Fed Funds Rates should remain low for an "extended period." Futures traders seem to be expecting the FOMC to drop the "extended period" language and move slightly closer to an actual rate hike. According to a recent Reuters article, "Data on Friday showing surprisingly strong retail sales in February suggested to some that the Fed should at least soften its zero-rate promise in case the economy starts to recover more rapidly from the worst recession since the Depression."

Predicting Prime Rate Using Fed Funds Interest Rate Futures

You may be able to predict what will happen with the Prime Rate using Fed Funds Interest Rate Futures. Fed Funds Interest Rate Futures are showing signs that traders are beginning to believe a rate hike is near. The December Fed Funds Interest Rate Future has already priced in an increase in the Fed Funds Rate to 0.500% from the current 0.000% - 0.250% range. Eurodollar Futures are also in line with a tighter monetary policy going forward.

If you currently have an adjustable rate second mortgage such as a traditional home equity loan, get a rate quote for today's current margins. Contact a home loan lender for a check up. You may be able to refinance your home equity loan to a lower margin. It may also make sense to reset your term because most home equity loans are only interest only for a short period. If your interest only term is nearly done, refinancing your home equity loan would give you a longer duration of interest only payments.

If you have not yet taken a home equity loan on your house, and think you may need cash in the future for college, home repairs, or debt consolidation, check rates on home equity loans today.


About Author:

Renee Morgan has been a loan officer for over eighteen years. She is also a freelance writer and guest expert for radio and TV.

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