Cut Will Aid Homeowners

Los Angeles Times (09/19/07); Petruno, TomWhile this week's short-term interest-rate reduction by the Federal Reserve is expected to help a multitude of people lower costs on their adjustable-rate mortgages (ARMs) and home-equity credit lines, it is not clear whether it will prop up the nation's troubled residential property market and lead to a rebound. The worst-case scenario is that the Fed's move could stoke inflation fears, resulting in an increase in conventional mortgage rates and adding to the housing market's troubles. Long-term mortgage rates are set by the marketplace, and one of the big considerations of investors in determining long-term rates is what inflation rate they forecast. At the same time, homeowners who have subprime ARMs with super-low teaser rates set to reset soon may still be facing a new rate that is more they can afford.