Why do 30 year mortgage rates verbs to rise, while the feed continues to lower the feed funds rate?
It seems as though when money is more readily available, the 30 yr mortgage rates should drop.
Answers:
You have to make out that the economy is still on a downward spiral and the government, including the FED, is trying to amount this mess out. Although the bailout plan has been passed, it is not surrounded by affect right now and it may be some time before it is implement, causing most banks and other lenders to postpone dropping mortgage rates.
Eventually, everything will work itself out and banks will get pay for to lending, but there will be much broader oversight and loans for business and home purchases will not be as unforced to get as they were within the past.
Source(s): MoneyMatters101.com
The Federal Reserve does not set mortgage rates. The marketplace for mortgage backed securities drives rates. With the government taking over Freddie and Fannie, contained by the longer run rates should come down because the Treasury is guaranteeing those securities explicitly so there is no difference in the risk between Treasuries and Freddie and Fannie securities, but in that is still a huge spread in the yields on those two investments. Once the bazaar recognizes this, the yields on the MBS should go down in line near Treasuries of the same maturity. There may be a small difference for liquidity premiums and transaction cost, but not the huge difference that have existed and grown for the last year.
Talk about inflation have caused rates to rise in the closing week or so, but flagging consumer confidence and, therefore, reduced spending should help to mitigate those concerns and rates will come rear down.
I hope this answer was helpful.
Source(s): BS nouns and 7 years mortgage lending experience.
30 years is a long time.
Interest rates aren't going to stay at 1% forever.
The interest rate cuts tend to affect short term borrowing.
The lenders are trying to recapture their losses. The fed funds are also for short residence money loans & a mortgage is not a short term money loan.
the feed rate you're refering to is the rate for overnight borrowing to what is in the industry referred to as window loans - loans that save the banks liquid amounts where on earth the government requires.
funding for mortgages, which are long term by personality, comes from investors. there are still too many disturbed people hessitant to invest in mortgages again.
so roughly, these two pools of money come from different sources and while one might be inclined to think they should move equal direction, there is nothing that really ties them together.
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Answers:
You have to make out that the economy is still on a downward spiral and the government, including the FED, is trying to amount this mess out. Although the bailout plan has been passed, it is not surrounded by affect right now and it may be some time before it is implement, causing most banks and other lenders to postpone dropping mortgage rates.
Eventually, everything will work itself out and banks will get pay for to lending, but there will be much broader oversight and loans for business and home purchases will not be as unforced to get as they were within the past.
Source(s): MoneyMatters101.com
The Federal Reserve does not set mortgage rates. The marketplace for mortgage backed securities drives rates. With the government taking over Freddie and Fannie, contained by the longer run rates should come down because the Treasury is guaranteeing those securities explicitly so there is no difference in the risk between Treasuries and Freddie and Fannie securities, but in that is still a huge spread in the yields on those two investments. Once the bazaar recognizes this, the yields on the MBS should go down in line near Treasuries of the same maturity. There may be a small difference for liquidity premiums and transaction cost, but not the huge difference that have existed and grown for the last year.
Talk about inflation have caused rates to rise in the closing week or so, but flagging consumer confidence and, therefore, reduced spending should help to mitigate those concerns and rates will come rear down.
I hope this answer was helpful.
Source(s): BS nouns and 7 years mortgage lending experience.
30 years is a long time.
Interest rates aren't going to stay at 1% forever.
The interest rate cuts tend to affect short term borrowing.
The lenders are trying to recapture their losses. The fed funds are also for short residence money loans & a mortgage is not a short term money loan.
the feed rate you're refering to is the rate for overnight borrowing to what is in the industry referred to as window loans - loans that save the banks liquid amounts where on earth the government requires.
funding for mortgages, which are long term by personality, comes from investors. there are still too many disturbed people hessitant to invest in mortgages again.
so roughly, these two pools of money come from different sources and while one might be inclined to think they should move equal direction, there is nothing that really ties them together.
Related Questions: