I have signed on a contract for a house, the lender wants me to lock in the rate of 6.36% today, should I wait untill the fed meets later this week. If the fed drops the prime rate .25% how much and how quickly will that effect my mortgage rate?
2007-10-30 07:43:09 · 7 answers · asked by Andrew E 1 in Business & Finance ➔ Renting & Real Estate
The "Fed", a private enterprise, controls the rate banks pay for loans from the reserve. (wholesale rate)
The prime interest rate is a retail rate banks charge their best costumers.
Mortgage rates are not set or controlled by any one; they are a function of market conditions.
When the Fed adjust rates there is no guarantee mortgage rates will do anything. They could go up, down or stay the same.
2007-10-30 08:05:28 · answer #1 · answered by Anonymous · 0⤊ 0⤋
Mortgage rates do not react in kind to Fed Rate changes.
Mortgage rates are determined by the markets perception of the long term inflation rate, and the long term Treasury rates. In fact, when the Fed lowered the rate .5% last month, mortgage rates actually went up.
Do not expect any change to have an effect on your loan.
2007-10-30 08:17:08 · answer #2 · answered by patrick 6 · 0⤊ 0⤋
The Fed rate is a SHORT TERM rate that the banks give to each other.
Mortgage rates are LONG TERM rates that are based on BONDS.
The bond rates are the indicator of where mortgage rates are going.
The fed rate can go down and the mortage rates can go up and vice versa. There is no real relationship.
2007-10-30 19:58:33 · answer #3 · answered by Anonymous · 0⤊ 0⤋
Wait until the Fed meets. The bank will react within 24 hours. The rate may go down, but not always. There are other factors at play. If they do go down, it may not be the full quarter point.
2007-10-30 07:55:59 · answer #4 · answered by Zeltar 6 · 0⤊ 0⤋
They won't drop, but go UP!
Why?
Dropping the rates destroys the value of the dollar.
Since the U.S. Government borrows 1 billion dollars a day, the investors demand a higher interest rate to compensate for the dollar losing it's value.
Hope this helps.
2007-10-31 14:37:26 · answer #5 · answered by Terry S 5 · 0⤊ 0⤋
It probably won't affect it, since mortgage rates aren't tied to the prime rate. They react to long term Treasuries and the like.
2007-10-30 08:01:27 · answer #6 · answered by acermill 7 · 0⤊ 0⤋
i think of it is the belief, to make the banks solvent, and canopy their undesirable loans. The fed does not do the correct volume of oversight and the folk could p.c.. up the tab. Bernanke isn't as much as the interest. i do no longer think of they could decrease iterest rates back quickly. we are going to finally end up with a yoyo economic equipment - up and down, up and down.
2016-10-03 00:58:18 · answer #7 · answered by ? 4 · 0⤊ 0⤋