When do rate cuts reflect in regular mortgage rates...?

Sorry, I realize this is an ignorant question, but everyone tells me something different, not to mention the constant barrage of advertising that claims to you must refinance TODAY!, and I certainly wouldn't trust a commissioned broker to give me honest information - but with the latest rate cut, it seems like it would be a good idea for me to refinance my house to 15 years, and put the extra money in my kiddos college fund. Refinancing is something I would like to do, but I am not in any hurry. I have 20 years left at 6.75%. Can anyone tell a real finance idiot how long it takes fed rate reductions to hit real bank rates? Sincere thanks.

and often don't reflect them much, at all. It took years of Fed cuts to get mortgages under the double digit rate, even though most of those years had the prime rate in the single digits.

If you want to refinance to a 15 year fixed mortgage, this is the time to do it, since rates are still at historical lows and you'll knock 5 years off the total life of your mortgage. Just finance what you owe, though, unless you've got one of those credit cards that is dinging you 30% interest.

About real vrs. fed rates, I didn't know that - interesting. Thanks again

although I know what you mean. The fact is mortgage rates have dropped substantially in the last year or so and fell quite dramatically after the Fed's surprise 75 basis point cut. Actually the mortgage rates tend to "factor in" expected Fed moves, but the impact certainly is not linear. A 0.75% cut in the overnight rate does not mean, and definitely does not cause, a 0.75% drop in mortgage rates. In this context the above poster is correct.

But the banks base their rates on bond markets, and factor in expected rate shifts from theFed via this conduit.

Case in point - the best mortgage rate I could get 1.3 years ago was 6%. I have 800+ Fico scores and well over 20% down, not in the jumbo category, so I'm pretty much an ideal mortgage customer. Just two days ago I locked in for my new house at 5.25%. The Fed has cut some 2.% in this same time so again not linear, but when I was shopping around before the surprise .75 cut best I could find was 5.625%. It's not that the .75 caused the sudden drop, but that the SURPRISE of the cut caused the rate drop.

I expect over the near term we may see a slight drop in Mtg rates to maybe 5.125 in the next few weeks but the drop will be much slower because the markets already assumed the Fed would cut rates in their scheduled meeting this week, so there will be no big impact immediately.

But yes, they move in the same direction, and in some cases very close to Fed rate cuts especially if they are surprises, but not in a linear way.

BTW if you have good credit and some equity you might want to look around to refi that 6.75%. It's generally about a 1.5-2% difference that makes the closing costs worthwhile to do so. Obviously run the numbers and get a closing cost estimate up front, but it could go either way for you right now. However I certainly can't imagine rates going up in the next few months so waiting a bit may get you an extra .125 or so.

Thanks for expanding on my post. This is the kind of information we should be getting out there.

Hell, it should be taught in high school.