Why do mortgage rates hang on to going up after the Fed lowers their interest rate?
We're in the market for a house, and it would give the impression of being that the lowering Fed rate would trickle down to the mortgage business. Instead, those rates keep going UP! How do they expect people to assistance out the economy by buying homes when they keep making it so unattainable and unsightly?
Answers:
Its going to transport A LONG TIME - MONTHS - before the general public feel the effects of any rate cut.
Those rates are for the transactions between
A] banks
B] and the banks to the Fed
C] and/or the Fed to the bank.
Thanks for asking your Q! I enjoyed answering it!
VTY,
Ron Berue
Yes, that is my actual last name! Source(s): My wonderful relations!
My wonderful coaches and mentors!
TWO [2] of THE ABSOLUTE BEST, MOST wonderful trading groups in the world, which I am most proud to be a member of!
Trading stocks and option more than 2 years.
"THE University of Hard Knocks"
So you still believe contained by the 'trickle down' theory, huh? You must have voted for Bush. The bank are sticking the extra profits in their pockets. That's what corporations do. Do you think they impart a crap about you? Hahahaha!
Mortgage rates are not driven by fed rates. They are driven by the bond market, which competes near mortgage backed securities for capital. Investors call for to buy the mortgages from the originators, and the rates are determined by their pricing models.
As a previous poster noted, mortgage rates follow the 10 year treasury most closely. The spread between the 10 year and mortgage rates has be increasing due to increased fears of inflation (which the fed cuts make even worse) and the standard perceived riskiness in the mortgage market (forclosure rate?). As such, investors are dictum they'd rather invest in other securities because the rates are not paying them satisfactory for the risk they are taking. That is why rates sometimes go up when the fed cuts.
Lowering the Fed rate primarily effects the amount of interest bank and financial institutions charge each other when they borrow money from each other and from the Fed. In checking not long, mortgage rates are holding pretty steady, not going up or down. If the rates that you are being quoted are going up, you might want to check your credit score. If you own good credit and good debt to income ratio, you should know how to get a mortgage between 5.5 and 6% right now and frankly those are great rates.
Bank have gotten hit complex by people that have walk away from their homes and they are having to sell these homes they forclose on for smaller quantity than is owed. So the banks are keeping the extra differnce in rates to increase their profits and spawn back some of that money they have lost within the last year.
Government is actually pretty pissed in the region of this, but the banks want their money back.
Mortgage rates are more closely tied to the 10-Year Treasury Note and *not* to the Federal Funds Rate. Due to the AVAILABILITY of credit, mortgages have not dropped as much as they have contained by the past. The spread between mortgage rates and the 10yr Treasury is about 1/2% larger than mundane.
Ronald Reagan's "trickle-down economic theory" (actually Arthur Laffer's) reminds me of what my middle school social studies don said back in the 70s roughly slavery. He told graphic stories of the conditions slaves faced on the boats to America. The slaves be shackled to different "shelves" in the hull of the boat and all their urine and feces would trickle down from the top to the poor schmucks below. That clear story paints Trickle Down Economics in a whole investigational light.
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Answers:
Its going to transport A LONG TIME - MONTHS - before the general public feel the effects of any rate cut.
Those rates are for the transactions between
A] banks
B] and the banks to the Fed
C] and/or the Fed to the bank.
Thanks for asking your Q! I enjoyed answering it!
VTY,
Ron Berue
Yes, that is my actual last name! Source(s): My wonderful relations!
My wonderful coaches and mentors!
TWO [2] of THE ABSOLUTE BEST, MOST wonderful trading groups in the world, which I am most proud to be a member of!
Trading stocks and option more than 2 years.
"THE University of Hard Knocks"
So you still believe contained by the 'trickle down' theory, huh? You must have voted for Bush. The bank are sticking the extra profits in their pockets. That's what corporations do. Do you think they impart a crap about you? Hahahaha!
Mortgage rates are not driven by fed rates. They are driven by the bond market, which competes near mortgage backed securities for capital. Investors call for to buy the mortgages from the originators, and the rates are determined by their pricing models.
As a previous poster noted, mortgage rates follow the 10 year treasury most closely. The spread between the 10 year and mortgage rates has be increasing due to increased fears of inflation (which the fed cuts make even worse) and the standard perceived riskiness in the mortgage market (forclosure rate?). As such, investors are dictum they'd rather invest in other securities because the rates are not paying them satisfactory for the risk they are taking. That is why rates sometimes go up when the fed cuts.
Lowering the Fed rate primarily effects the amount of interest bank and financial institutions charge each other when they borrow money from each other and from the Fed. In checking not long, mortgage rates are holding pretty steady, not going up or down. If the rates that you are being quoted are going up, you might want to check your credit score. If you own good credit and good debt to income ratio, you should know how to get a mortgage between 5.5 and 6% right now and frankly those are great rates.
Bank have gotten hit complex by people that have walk away from their homes and they are having to sell these homes they forclose on for smaller quantity than is owed. So the banks are keeping the extra differnce in rates to increase their profits and spawn back some of that money they have lost within the last year.
Government is actually pretty pissed in the region of this, but the banks want their money back.
Mortgage rates are more closely tied to the 10-Year Treasury Note and *not* to the Federal Funds Rate. Due to the AVAILABILITY of credit, mortgages have not dropped as much as they have contained by the past. The spread between mortgage rates and the 10yr Treasury is about 1/2% larger than mundane.
Ronald Reagan's "trickle-down economic theory" (actually Arthur Laffer's) reminds me of what my middle school social studies don said back in the 70s roughly slavery. He told graphic stories of the conditions slaves faced on the boats to America. The slaves be shackled to different "shelves" in the hull of the boat and all their urine and feces would trickle down from the top to the poor schmucks below. That clear story paints Trickle Down Economics in a whole investigational light.
Related Questions: