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So what happens now?
After all the excitement of the past several weeks, mortgage rates seem poised to take a breather here. The market has adjusted to reflect the likelihood that Federal Reserve Board officials will declare victory in the war against inflation at their mid-December meeting. Stocks have stabilized. Unemployment figures for last month were encouraging from a rate perspective, but not bad enough to suggest recession looms and send rates lower.
Basically, that makes this a good time for consumers to sit down and ponder their mortgages. It may not be as much fun as downing 50 slices of gravy-laden turkey, but it could be much more rewarding.
Consider that long-term loan rates are now at their lowest level since the spring of 1999. While they're unlikely to get as low as they did in October 1998, they're low enough that refinancing makes sense for many borrowers.
Consumers who took out home equity loans recently and those who purchased homes earlier this year, for instance, should research whether rolling their second mortgages into new firsts or refinancing altogether will save them money.
Shoppers who are accumulating heavy credit card debt for the holidays should start watching rates, too. If they stay where they are or decline further, consolidating that debt into a new first mortgage early in 2001 could help lower monthly payments and provide a much-needed cash flow boost.
As for people looking to tap their equity via a line of credit or loan, they should consider the long-term interest rate outlook before heading to a lender's office.
The Fed will almost certainly say in a post-meeting statement Dec. 19 that the risk of an economic slowdown is equal to the risk of inflation accelerating. That's a change from statements over the past year, which have all contained language warning that inflation is the primary threat.
The shift will signal that rate cuts -- rather than rate hikes -- may be in the cards for the first time in a long while. As a result, home equity borrowers should opt for variable-rate lines of credit rather than fixed-rate equity loans because rates on the former will fall along with any Fed cuts, while rates on the latter will remain steady.
One last bit of advice: Rates will likely fall further if economic growth slows the way many experts predict. That means homeowners who are having no trouble making their mortgage payments should probably wait for 30-year rates to drift closer to 7 percent from their current 7.5 percent range before refinancing in order to maximize their savings.
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