But again, not if it means cutting back contributions to retirement accounts. Don't do it. You accomplish exactly the same thing with no fee by making a 13th monthly payment each year. Tapping equity When the Federal Reserve Board cuts short-term interest rates, as it has four times in 2001, the phones at mortgage companies ring off the hook. Homeowners want to refinance mortgages at the better rate they believe the Fed cut will cause.
Trouble is, they're already too late.
The bond market determines interest on fixed-rate mortgages. Bond traders anticipate Fed rate-cutting and factor it into bond prices long before the actual event. Borrowers who jump to respond to Fed actions aren't getting burned too badly now, though. But borrowers can't judge a refinancing deal strictly by interest rates. The cost of the transaction matters, too.