Rates on fixed-rate mortgages move in anticipation of Fed moves, rather than waiting for the actual moves to happen. As a result, the one-half of a percentage point, or 50 basis point, rate cut on May 15 won't translate into a similar decline in mortgage rates. Truth be told, fixed mortgage rates will likely rise in its wake. The Fed's cuts in 2001 have been so aggressive that many market watchers think the economy will rebound later this year. Rates have virtually no chance of falling significantly and a fair chance of rising as 2001 progresses.
Mortgage rates are still below their historic averages too.
Good deals can be found, even if rates are a little higher than they were in March. Know what you can afford in a home and a loan, and don't take a deal that won't work for your budget. Thirty-year rates averaged 7.08 percent on May 9. With the Fed unlikely to raise rates anytime soon, ARM rates should stay low or even go lower over the next couple of months. Someone who plans to live in a house for only a couple of years might want to consider a short-term ARM now that rates on them have fallen.