Davidson Realty, Inc.

Fed Rate vs Mortgage Rates……what gives?

March 23, 2020

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Posted by in News

Ah yes! This has been a popular topic since the Federal Reserve’s emergency rate cut to a range of 0% to .25%.

 

Coming off March 9 mortgage rates that were at historic lows to—not even four days later—being about a full percentage point higher, the Fed again cut the rates on March 15. This is what’s going to send mortgage rates to guaranteed rock bottom lows, right?

 

In the words of famed football coach and broadcaster Lee Corso, “Not so fast my friend!”

 

The Fed Funds Rate deals more directly with short-term rate items like credit cards, savings rates and bank-to-bank short-term loans. You may see a credit card APR go down (YES!), but generally, the Fed rate is not a consumer lending rate.

 

Although the mortgage rates have a tendency to mirror the direction of the Fed Funds Rate, it is never a direct correlation.  Remember, the Fed Funds Rate is for short-term rates and mortgages are not short-term.

 

So, what IS going to happen? 

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