With the Feds adjectives interest rates, why are the mortgage rates going up?
Because with the economy surrounded by a downward trend, any loan the bank makes will be more risky. And near home prices still falling, the property value could become less than the mortgage symmetry.
Well, it is somewhat complicated, but basically, the bond market is what really controls the flow of money contained by and out of the mortgage industry. As money flows into the market, the basic rules of supply and constraint take precedence. When the supply expands, rates typically are lower as the money needs to be moved and the price is lowered to move it.
When the money supply starts to become low, the cost to lend is increased. Like any commodity, when supplies are elevated, prices are lower and when supplies are low, the prices are higher.
Right now, even though the Fed have cut the discount rate, the supply of money is still somewhat tight, consequently the rates have not fallen.
because bank typically set rates based on LIBOR, not the fed funds rate.
LIBOR is the London Inter-Bank Offered Rate. it's the rate that bank are willing to lend to one another. since so many bank have been going beneath, banks are less predisposed to lend to one another than they used to be. because of this, the rate that the lending banks constraint is higher, to compensate for the risk that the bank that they're lend to might fail.
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Well, it is somewhat complicated, but basically, the bond market is what really controls the flow of money contained by and out of the mortgage industry. As money flows into the market, the basic rules of supply and constraint take precedence. When the supply expands, rates typically are lower as the money needs to be moved and the price is lowered to move it.
When the money supply starts to become low, the cost to lend is increased. Like any commodity, when supplies are elevated, prices are lower and when supplies are low, the prices are higher.
Right now, even though the Fed have cut the discount rate, the supply of money is still somewhat tight, consequently the rates have not fallen.
because bank typically set rates based on LIBOR, not the fed funds rate.
LIBOR is the London Inter-Bank Offered Rate. it's the rate that bank are willing to lend to one another. since so many bank have been going beneath, banks are less predisposed to lend to one another than they used to be. because of this, the rate that the lending banks constraint is higher, to compensate for the risk that the bank that they're lend to might fail.
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