Rates are going down, what does this mean to your mortgage?

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Real Estate Agent with Aksland Real Estate

This means that rates are potentially going up, since the feds funds rate which was just cut, mainly applies to corporations on the bank investor. The ten-year treasury note is tied in directly to the bond investor,(not the fed funds rate as is commonly thought) and that is what causes mortgage rates to go down.  The catch is that if interest rates go down then bond investors will demand a higher return, thus causing interest rates to go up for mortgages. In addition, many banks or mortgage lenders are charging fees to help them make profits, which causes the mortgage payment to go up.

So to sum it up, what does the fed rate cut over the last two days mean for the consumer?  The answer is higher interest rates.  Don't be surprised to see rates up to 7% in the near future.

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federal reserve
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Rainer
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Jeff Fullmer
FM Properties - Idaho Falls, ID
Real Estate Investor/Financier

Glad you posted this Matt! I feel like a broken record during the Fed rate cut weeks trying to explain this to everyone.

Fortunately, inflation didn't climb too much and Fannie & Freddie were freed up a little bit by the Gov. So unlike the past 4 times the fed cut rates, we are seeing mortgage rates hold steady, if not dip a bit. Not to mention the drop in oil prices.

 

Mar 20, 2008 05:54 PM #1
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Matthew Zgonc

Realtor, CFS, CVS
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