|
 Consumers
are often misled when it comes to the subject of the Federal Reserve
and how it affects mortgage interest rates. Often the media is the
culprit causing the confusion. In the last few years, the Fed has
taken action that caused mortgage interest rates to move in a direction
other than what consumers expected, because the media provided weak
reporting on the subject.
If The Federal Reserve Doesn't Effect Mortgage
Interest Rates - What Does?
The Federal Reserve affects short-term interest rate maturities,
the Fed Funds rate, and the Overnight Lending rate. These factors
have a direct impact on the Prime rate. If you took only this into
consideration, you may mistakenly conclude that changes made by
the Fed will cause a similar movement in mortgage interest rates.
However, mortgage interest rates are dictated by the trading of
mortgage-backed securities, which trade on a daily basis. The real
dynamic at the heart of interest rate movement is the relationship
between stocks and bonds.
Stocks and bonds compete for the same investment
dollar on a daily basis. There is literally only so much money to
be invested. When the Federal Reserve feels that interest rates
need to be decreased in an effort to stimulate the economy,
this reduction in rates can often cause a stock market rally. When
the market becomes bullish, the money to invest in stocks comes
from the selling of mortgage-backed securities.
Unfortunately, selling mortgage-backed securities
to fuel stock market rallies causes interest rates to go up,
not down.
Historically, there have been many times when
the Federal Reserve has increased interest rates. Stocks then sell
off in fear that the increase will affect corporate profit margins,
and the liquidated stock assets need a place to park until the next
rally comes along. The safe haven is found in mortgage-backed securities
which cause mortgage rates to drop.
The daily ebb and flow of money is what matters
most when it comes to the movement of mortgage interest rates. We
make it a point to continuously monitor interest rates for our clients,
and advise them of opportunities to manage their mortgage debt at
a better rate. This is the foundation of our business model as a
trusted advisor.
Contact us today to
talk with a loan officer about your home loan needs.
[Dealing
with Credit Score Challenges] [Good
Credit Translates into Lower Interest] [Learn
About Credit Remediation] [Learn
the Five Factors of Credit Scoring]
[The Truth About Home Appraisals] [Interest
Rates]
[Learn the Five Factors
of Credit Scoring] [Return to Articles page]
| |
| | | |
| | |
|
Mortgage Master Service Corporation
24909 104th Ave. S.E., Suite 100,
Kent, WA 98030
Phone: 253-859-5300 Toll Free: 800-583-7200
Fax: 206-382-9612 (Seattle line)
Email:
|
