Predictions for future LIBOR and PRIME rates

[brandons87]

I'm trying to decide when to consolidate a large private loan I have thats drowning me. Is currently 60k at 8.89% which means the interest payments alone are over $500 per month. The loans are in deferment right now but the interest keeps capitalizing so I have no choice but to keep paying the interest even though I'm still in school.

I've seen a lot of private consolidation loan offers. Most of them offer LIBOR + 2.5% all the way up to LIBOR + 6%.

Some of hte programs are based on the PRIME rate and vary from PRIME + 0% all the way up to PRIME + 5%.

The PRIME rate today is 5.25%. When does the fed meet again? Will they keep lowering interest rates for the next few months because we are in a recession? Or are rates already bottomed out?

Also, whats the forecast for LIBOR? Is that related to PRIME or is it a totally independent variable? Is it projected to go up or down over the next few months?

 

[zork]

If the fed lowers again soon, in my opinion, the future expected inflation rate will be higher than now. If that actually is the way the market interprets the next fed move then rates all along the yield curve will go up even though the fed rates will be lower. Fed only tries to guide, the market decides what the expected inflation rate is going to be all along the Y curve.

That is just my humble opinion. Also, if you are ready to make a move then do it and make sure you get in. Trying to play it too cute will burn you more times than not in my opinion too.

 

[brandons87]

When does the fed meet again to set interest rates?

Will there be a substantial change before then?

 

[DCLonghorn8]

This is no indication of the immediate future but the Fed rate is at recent-historic lows. That will have to come up to attack inflationary concerns and will likely do so as soon as the Fed is convinced they have steered through the current liquidity crisis. It's anyone's guess as to when that will happen or how long that may take.

Mortgage rates are at 20 year lows and most/a lot of ARMs are tied to the LIBOR.

The LIBOR just dropped a big chunk in the last three months. It doesn't really track with the Fed, but does in a delayed and indirect way. If that premise is true, the LIBOR may still drop more with the recent two cuts by the Fed.

I am of the opinion (I ain't no expert) that now or close to now is the time to refi and I may refi shortly a mortgage that will adjust in the early fall. That mortgage is tied to the LIBOR.

Interestingly, the LIBOR has dropped so much that even when it adjusts and the mortgage company adds their 3% margin to the LIBOR, it may still be a lower payment than what I started with or close to it.

But that will only be the case for one year and I am thinking of locking something in now.

It doesn't sound like you are talking mortgages here, but the mortgage package that is the most attractive in my area right now is a 30 year fixed interest only.

I had never heard of this package until jimmyjazz mentioned it in a thread on ARMS, and soon thereafter I started tracking it.

It will barely raise my payments and lock in a current rate for 30 years. The first ten years is interest only and then the remainder of the loan is amortized over the final 20 years. It has the lower monthly payment than all but one (crazy short term ARM IO) package my bank offers right now.

If the rates go up much in the next ten years, and I happen to be in the same house (doubtful), that adjustment will look pretty solid in 10 years and I can make extra payments in the first ten if I need to.

Good luck.