rates hit their lowest point in history

Last week, rates hit their lowest point in history, and ended the week about a quarter percent lower than where they began. Although the week ahead will be a short one, there are still several economic indicators scheduled for release that will likely impact rates.
Before we address the week ahead, last week rates hit their lowest point since record keeping began. The big news last week was, of course, the Fed's announcement after their final FOMC meeting of 2008.

In a bold move the Fed decided to drop the Federal Funds Rate (the rate banks charge each other to lend money overnight) to a target of between 0 to .25% and the Discount Rate (the rate at which banks can borrow directly from a Federal Reserve Bank) by .75% to .50%.

Normally, this would have been devastating to mortgage rates and would have likely pushed rates much higher. (Remember, lower rates by the Fed often equate to increased inflation, which is the arch enemy of bonds.) However, in conjunction with the Fed's announcement of decreasing rates to their lowest point ever, the Fed also announced it would be buying as much as $600 Billion of debt issued or guaranteed by Fannie Mae, Freddie Mac and other government-backed mortgage businesses in a direct effort to help lower home loan rates. This news caused bonds to rally to their highest price ever, which in turn pushed rates to their lowest point ever.

The big question is - Will the actions of the Fed last and for how long? One thing is for sure, if your customers qualify for a refinance loan, they may be seeing the lowest rates ever right now.