Another Rate Hike Coming?

The Fed’s last scheduled meeting of 2005 and the next-to-last meeting in the 18 ½ year tenure of Fed Chairman Alan Greenspan takes place tomorrow ( 12/13/05 ). Continuing the trend of increases in the Fed Funds Rate, another .25% bump is expected.

What does this mean to you? The Fed Funds Rate is the rate at which banks lend each other money. Accordingly, there is a direct correlation between the pricing of comsumer loans and the fed funds rate. If you have a Home Equity Line of Credit (HELOC), it is linked to the Prime Rate. When the Fed Funds Rate changes, the Prime Rate will follow, and the interest rate on your HELOC will change as well.

If you are seeing higher rates on your HELOC than you are comfortable with, consider one of two options:
1. Refinance your first mortgage and HELOC into a new first mortgage to lock in and lower the interest rate on the money you owe for your home; or
2. Refinance your HELOC into a fixed rate second mortgage.

Option two is cost effective and does not require the same amount of documentation as refinancing a first mortgage. However, given the increase in home values over the last five years, many home owners find that they owe less than 80% of the value of their home, and qualify for a single fixed rate mortgage which with no private mortgage insurance. With mortgage rates on the rise, now is a good time to consider refinancing.

I am available for a no-obligation credit and mortgage review. Call me today at 414.453.7620 or e-mail peter @ klmmortgagegroup.com to make an appointment!