Looking for what's new and what's now in the real estate world. The Jersey Group and Bob The Broker have joined forces on this blog dedicated to all aspects of the real estate business.

The Federal Reserve is a hot topic in the news these days, as every month we hear new discussions of "The Fed. cutting rates".  Most people immediately assume that this means mortgage rates are being cut.  The only direct correlation between what the Fed. does and mortgage rates is for those who have a Home equity Line or 2nd mortgage that is based on prime.  Other than that, what happens to mortgage rates is mostly dependant upon market reaction to the Fed. moves. 

I read a blog by Matthew Graham, a mortgage professional from Oregon, that best explains everything:

"First of all, IN GENERAL, what is stimulative to the "economy" is bad for mortgage rates.  Reason: if the economy is happy, stocks are going up.  If stocks are going up, traders and investors must be buying them.  If they are buying stocks, they aren't buying bonds.  If they aren't buying bonds, bond issuers lower the price to attract buyers.  If bond prices (mortgage backed securities), go lower, then yields are higher.  Higher yields on MBS's equate in exactly direct proportion to higher mortgage rates.  Whew...."

This is not to say that mortgage rates will go up after the Feds moves.  Just to show that rates have nothing to do with what the move is, but how the move is perceived...

I could go on for hours on this topic.  Feel free to email or call with comments or questions.