Consumption and Real Estate
Why are 30 year fixed mortgage rates going up when the Fed announced a half percentage cut in interest rates?
-
-
#2 written by Terry S 1 year ago
Because the fed DOES NOT control 30 year rates.
The investors that buy these mortgage backed securities actually control the interest rates.
Here’s what happens.
1. The Fed lowers rates.
2. The dollar tanks.
3. Inflation (I.E. Gold) rallies big time.
4. The investors demand a higher interest rates for destroying the dollar.
5. The public is confused because they don’t understand the relationship between a weak dollar and rising interest rates.Hope this helps.
Terry S.
-
#3 written by Mary B 1 year ago
Because the Fed Rate and the Mortgage rates are 100% unrrelated, and the general public is having a very difficult time swallowing that concept.
The Fed Rate is a rate offered to LENDERS.
Whether or not the lenders CHOOSE to pass that savings along to the consumer, is up to them.
You saw no change or a raise in rates as mortgage company’s are scrambling to recover from foreclosure/shortsale losses as more are expected in the 4th quarter and the 1st quarter 2008.
- Comment Feed for this Post
Because the Fed. cut the Federal Funds rate and the Discount Rate which do not affect the 30 year morgage rates. They affect the rates at which banks borrow money from the Federal Reserve.