I noticed that after the Fed lowered their interest rates a few weeks ago mortgage rates actually went up slightly. What happened?
2007-10-01 06:18:51 · 7 answers · asked by uncle J 4 in Business & Finance ➔ Credit
Happens every single time.
The fed can decide what the banks charge eachother. They cant decide what mortgage rates are.
Mortgage bonds are sold on the open market, like corn or oil. They are called mortgage backed securities. When the fed lowered the interest rate stock companies had cheaper money to borrower. Thus making the stock market more interesting then the bond market.
Mortgage backed securities went up. Why? Suppy and demand they put their money back in the stock market instead of keeping it in the bond market. So rates had to increase to keep others interested.
To answer your question simply. The Fed doesent control interest rates for mortgages. Its paid for on the open market for what people/companies/countries want to make. When the Fed lowered the bank rate it put pressure on the bond rate. They are totally different and the Fed doesnt control it. There was less money in the bond market because of the fed.
Less money? Suppy and demand rates go up.
2007-10-01 06:33:48 · answer #1 · answered by financing_loans 6 · 2⤊ 0⤋
This can be a complicated question to answer in detail...to keep it simple this is what happened. When the fed lowers interest rates it makes the US dollar worth less worldwide and can lead to infationary pressure on the band market. Fixed mortgage rates are ONLY affected by mortgage bonds (aka mortgage backed securities), not the t-bill. So, in a nutshell when the fed lowers rates a mortgage bond (or any bond for that matter) potentially has the risk of losing value over time. This causes investors to get out of the bond market and back into the stock market... which causes more supply than demand for bonds...which lowers the price/value of bonds...which makes rates go up.
The mortgage rate/ mortgage bond relationship works in this manner: When the price of mortgage bonds go up, fixed mortgage rates decrease; and vice versa.
The overall economy plays a big role in mortgage rates. The bonds are sold on the open market and are affected by ecomic news just as much as stocks are.
2007-10-01 13:02:20 · answer #2 · answered by Tom L 1 · 0⤊ 0⤋
actual an rather sturdy price for one hundred% financing, till you qualify for a first time homebuyer application in CA. those expenses are slightly decrease. yet, what you probably did not tell all of us is what type of personal loan this is, 30 365 days fastened, how a lot the lender is charging you for that price. what's their factors and lender expenses? each from time to time creditors do not instruct the price in factors because individuals are in contact what percentage factors there are and they are going to bury the price in lender expenses. If expenses seem life like then tremendous! regrettably the only top few weeks expenses of pastime were creeping up back. inspite of what the media shows. They run about per week behind each little thing.
2016-10-20 04:18:24 · answer #3 · answered by ? 4 · 0⤊ 0⤋
the two are not directly related mortgage rates fall in line with t-bills not the discount rate that's more for autos and credit card with variable rates
2007-10-01 06:31:00 · answer #4 · answered by Anonymous · 0⤊ 0⤋
The fed may have lowered ,
But the lenders still have to make up for all those foreclosures .
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2007-10-01 06:23:28 · answer #5 · answered by kate 7 · 0⤊ 0⤋
Yes, it is sad..owning your own home used to be the American dream, but with high property taxes,homeowner insurance, etc,more people than ever are losing their homes through foreclosure. I think that is why banks and other lenders have to keep their rates higher.
2007-10-01 06:27:50 · answer #6 · answered by Harley Lady 7 · 0⤊ 1⤋
tricky problem. look into from search engines like google. that will will help!
2014-11-05 19:48:34 · answer #7 · answered by Anonymous · 0⤊ 0⤋