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Rates on home loans are falling and may move lower as the Fed slashes short-term borrowing costs.

By MarketWatch

Homeowners facing resets on their adjustable-rate mortgages or hoping to refinance into less-burdensome loans may be the biggest beneficiaries of the Federal Reserve's surprise rate cut this week as mortgages continue to get cheaper.

As many as 2 million homeowners face ARM resets this year and declining interest rates hold out the promise of at least limiting the sticker shock of higher payments on loans linked to Treasury indexes used to calculate many adjustments.

Lower rates also will make it easier for homeowners to qualify for refinanced loans, mortgage professionals say.

• Ready to refinance? See current rates

"For anyone on the margin, this will provide some relief," said Richard Musci, vice president of Charles Schwab Bank. But he warned that for those already struggling or already behind on credit payments "the die has been cast."

The Federal Reserve's emergency interest-rate reduction of three-quarters of a percentage point brought the central bank's key lending rate down to 3.5% from 4.25%. It was the most aggressive one-time cut in more than two decades, and its bombshell nature underscored the Fed's worries that credit conditions for consumers and businesses are at a breaking point.

"Whenever you lower rates, it can't hurt the consumer," said Bernard Baumohl, managing director of the Economic Outlook Group. "The Fed never promised it could change things dramatically overnight. There's a certain timeline with a cut in rates of nine months to 18 months when the economy feels the benefits."

http://articles.moneycentral.msn.com/Banking/HomeFinancing/PrimeTimeToRefinanceMortgage.aspx