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The FED Rates Effect on
Home Mortgages The FED Rates Effect
on Home Mortgages Recently the Federal
Reserve decided to hold the short term interest rate steady, following a
series of steady rate cuts, which normally signals a change in direction of
lending rates, but the Central Bank had cut rates seven times since September
in an effort to bolster the economy and spur economic growth. During that
time mortgage rates were increasing. So what gives? And what should consumers
expect loan rates to do next? The Fed funds rate
is often thought of as a benchmark to set rates paid by consumers on many
types of loans, including real estate mortgages, therefore people often will
expect the mortgage rates to decline. That is not necessarily the case. To quote Eric Tyson,
author of “Personal Finance for Dummies” Rates are set by market forces and
they have been trading higher in part because of inflationary concerns and,
because of Fed expectations. Sometime in the near future investors expect the
fed rate to be increased; therefore mortgage rates have already begun to tick
higher. Rather than track
the fed funds rate, fixed mortgage rates are more closely aligned with the 10
year treasury note. While the lagging economy has bolstered the yield on the
10-year note. It still remains at a relatively low level. Even as the fed
leaves the rates unchanged, what they say about economic picture could
influence consumer interest rates in one direction or another. The fed rate
is important to pay attention to, but the it may not
be a good idea to expect the rates to decline just because the fed rate has. Since no one can
predict what the economy will do, and how the fed will react, it is not a
wise idea to make critical decisions based on expectations about what will
happen with interest rate. Today rates are very good, in fact at the lowest
they have been in a long time and holding relatively steady. So, if you are
in the market for a house, or looking at re-financing for a better rate, NOW
may be the time to pull the trigger. Any questions can be
directed to Benchmark Title at 618-239-3750. Please feel free to call or
email:
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