Comments on: What the Federal Rate Cut Means for Homeowners http://www.realestateinsight.com/2007/10/what-the-federal-rate-cut-means-for-homeowners/ Real Estate Insight® Tue, 15 Nov 2011 08:06:40 +0000 hourly 1 http://wordpress.org/?v=3.2.1 By: Sally http://www.realestateinsight.com/2007/10/what-the-federal-rate-cut-means-for-homeowners/#comment-14847 Sally Tue, 05 Feb 2008 20:46:20 +0000 http://www.realestateinsight.com/?p=59#comment-14847 Lots of people have been asking Cherie and me the same question.The Discount Rate is the interest rate the Federal Reserve Banks charge depository institutions on overnight loans. It is an administered rate, set by the Federal Reserve Banks, rather than a market rate of interest. The primary conventional mortgage rate is a market-determined interest rate for long-term residential mortgage loans. A change in the short-term discount rate may not affect interest rates on long-term mortgages. Depending on whom you ask, you'll get a number of explanations of why mortgage rates are going up while the overnight rate is going down. One reason might be that investors are reacting to the Fed's rate moves by selling bonds and buying stocks. The reduced demand for bonds makes their yields go up, and mortgage rates follow. If investors pull out of the stock market and invest in bonds, the rates will go down. As far as the future of the rates, as I always say, if I had a crystal ball, I would be rich, but what i can tell you is even with the volatility of the past two weeks, interest rates are lower now than they were last fall, refi's were up 22% last week, it is a great time to buy. Lots of people have been asking Cherie and me the same question.The Discount Rate is the interest rate the Federal Reserve Banks charge depository institutions on overnight loans. It is an administered rate, set by the Federal Reserve Banks, rather than a market rate of interest. The primary conventional mortgage rate is a market-determined interest rate for long-term residential mortgage loans. A change in the short-term discount rate may not affect interest rates on long-term mortgages.

Depending on whom you ask, you’ll get a number of explanations of why mortgage rates are going up while the overnight rate is going down. One reason might be that investors are reacting to the Fed’s rate moves by selling bonds and buying stocks. The reduced demand for bonds makes their yields go up, and mortgage rates follow. If investors pull out of the stock market and invest in bonds, the rates will go down.

As far as the future of the rates, as I always say, if I had a crystal ball, I would be rich, but what i can tell you is even with the volatility of the past two weeks, interest rates are lower now than they were last fall, refi’s were up 22% last week, it is a great time to buy.

]]> By: Densingh http://www.realestateinsight.com/2007/10/what-the-federal-rate-cut-means-for-homeowners/#comment-14796 Densingh Mon, 04 Feb 2008 16:12:44 +0000 http://www.realestateinsight.com/?p=59#comment-14796 I would like to receive clarification - correlation between fed rate cut and home mortgage rates - especially the fixed rates. Last week, before the feds cut interest rates, the 15 year Fixed rate was at 4.75% at Tampa Bay Federal Credit Union. Two days after the feds .5% rate cut, the 15 year mortgage rate went down from 4.75% to 4.625% and not down to 4.25% which is what I expected. My question is the following: 1. Understand the correlation between the Feds rate cut and home mortgage rates? 2. Will I ever see the rate down to 4.25% for 15 years? 3. This morning, the 15 year mortgage is actually up to 5.25% from last week\\\'s 4.625%. What is the near term projection? Please let me know. Thank you very much Densingh I would like to receive clarification – correlation between fed rate cut and home mortgage rates – especially the fixed rates. Last week, before the feds cut interest rates, the 15 year Fixed rate was at 4.75% at Tampa Bay Federal Credit Union. Two days after the feds .5% rate cut, the 15 year mortgage rate went down from 4.75% to 4.625% and not down to 4.25% which is what I expected.

My question is the following:
1. Understand the correlation between the Feds rate cut and home mortgage rates?
2. Will I ever see the rate down to 4.25% for 15 years?
3. This morning, the 15 year mortgage is actually up to 5.25% from last week\\\’s 4.625%. What is the near term projection?

Please let me know.

Thank you very much

Densingh

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