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.
HLS – I agree that you are dead on that the vast majority of the general public is clueless about the impact of federal funds rate on mortgages, particularly 30-year fixed rates.
I think your reaction in the first page of this thread reflects that.
Piggingtonians tend to be a bit better edumacated about interaction of changes in short term rates and how they relate to ARM resets and HELOCs. A general trends towards lower short-term rates (which began prior to this rate cut, in anticipation) does historically tend to improve the environment for ARMs. However, as you correctly point out, the devil is in the details. People need to understand the terms of their loan (and also the terms of the loans sitting out there getting ready to re-set) to understand the impact. These things include the Index, Margin, Periodic Cap, Lifetime Cap, etc.
I am merely guessing (based on historical trends)that reduction in short-term rates will improve the environment for some fraction of debtors as their loans re-set.
An interesting issue will be whether the 12-month LIBOR and short-term Treasuries remain as correlated as in the past.
That said, I still think a large chunk of those experiencing re-sets in the next few months are headed for foreclosure.
