RE: Fed Rate Correlation To Mortgage Rate?
This insightful information is brought to you by the very knowledgable Nicole Rueth with Fairway Mortgage.
The Fed Rate Dropped....Wait!! Mortgage Rates went up??!!
The Federal Reserve cut interest rates for the third time this year as the US economy continued slowing amid ongoing trade disputes and weak global growth. The federal funds rate, which affects the cost of short term debt, credit cards and car loans for example, will now hover between 1.5% and 1.75%.
It's important to remind clients that Fed rate cuts have very little impact to long-term fixed mortgage rates. At times, mortgage rates will actually move in the other direction of the rate cut or not move at all. In the short term, a Fed rate cut typically has an impact to stock prices which takes money away from bonds, thereby resulting in higher long term rates. In addition, a rate cut is intended to increase economic growth which can be inflationary. All of this is usually bad for mortgage rates and could result in higher rates for the borrower in the immediate future.
Mortgage rates loved when Powell said (in post meeting commentary) that he was going to hold steady and allow the data to determine the next fed move. He also said he would NOT take back these rates cuts. What happened on Friday though took back any gain from Thursday when strong Job numbers came out above expectations. So you see... Powell and the Fed Rate drop only gave us a glimmer of excitement.
Call ME if you have any questions on our current real estate market!! I'm always happy to help! Kylie