Those with ARMS that have LIBOR as an index still have a margin.

Will LIBOR will drop 50bps tomorrow ? I don’t know.

Many ARMS have a +2% point cap on their 1st increase with no neg am.
IF your index plus margin is over that cap, the drop in rate isn’t going to change your increase in rate OR your payment one single penny. It depends on where you are at in your cycle.

A 5% rate with a 2% increase, is going to be a 7% rate.
If your index plus margin on your first reset is 12% or 7.01%, you rate will STILL BE 7%. Often future increases are capped also, so the fact is that the FF decrease may mean not a penny in savings to some.

Some of you seem to know what you are saying or wanting to say. Others may not understand the terms of their loan, which isn’t surprising.

I have callers who insisted that a cut by the fed will be a half point cut to their rate. I sure that many people agree with them.

If you want to know if the cut in FFR is going to lower your ARM payment, do the math, but the answer to the earlier question is that it isn’t going to change your October payment.

I guess I just don’t understand loans, sorry.

PS:
LIBOR = “London Inter-Bank Offered Rate.” Based on rates that banks in London offer each other for interbank deposits. From a bank’s perspective, deposits are funds that are loaned to them. LIBOR is a rate at which London banks can borrow money from other banks. Rates are complicated. There is a 1 month, 3 month, 6 month and 1 year LIBOR rate.

Rates before July 2007 usually reflect the Fannie Mae LIBOR rate which used a different calculation. Fannie Mae discontinued its use and publication of LIBOR rates at the end of June 2007.