Posted by The Upfront Mortgage Broker in Florida- Are fixed mortgage rates headed even higher?
- Posted by The Upfront Mortgage Broker
- The Federal Reserve cut interest rates by three-quarters of a percentage point this past Tuesday, but don’t expect mortgage rates to go down too. In fact, fixed rate home loans could be headed higher.
- Here’s the proof: The Fed issued an emergency reduction in short-term rates in January, and then trimmed more just a few days later – but the 30-year fixed mortgage rate responded by climbing from 5.6% to 6.4%.
- The Fed’s control is over the short-term fed funds rate which determines what banks charge one another for overnight loans. Long-term mortgage rates are mainly tied to the 10-year Treasury yield.
- Who will benefit from the recent rate cuts? ARM borrowers may get some help. There is a closer tie between the Fed rate cuts and short-term adjustable rate mortgages (ARMs). In fact, some homeowners with ARM loans could actually see a lower rate from future interest rate cuts. Adjustable rate mortgages are tied to a number of different indexes, some are the one-year Treasury yield and the international Libor, or London Interbank Offered Rate, which tend to move with the Fed funds rate.
- How do we get the long term rates to go down? Here is my opinion. For long-term fixed mortgage rates to go down, the Fed must successfully make banks more willing to lend again.
- Respectfully,
The Florida Upfront Mortgage Broker
Joe Bartolotta
Residential, Commercial & Reverse Mortgages
Direct 407.340.0220
Joe (at) the upfront mortgage broker (dot) com
2 Comments, Comment or Ping
Joe Bartolotta
Thanks for the comment.
Joe
Apr 14th, 2008
Reply to “Will the Fed’s Rate Cut Send Mortgage Rates Higher?”