How Does the Fed Affect Mortgage Rates?

Reblogger Amanda S. Davidson
Real Estate Broker/Owner with Amanda Davidson Real Estate Group 0225221517

John Meussner with Mason-McDuffie Mortgage Corporation shares an excellent post with us. The Fed increasing rates doesn't mean it's time to panic over mortgage rates. Check out John's post to see how the Fed affects mortgage rates - you might be surprised at what you find!

Original content by John Meussner NMLS #138061 MMCD #1141

How Does the Fed Affect Mortgage Rates?



     What does the Fed do to mortgage rates?  In the words of the late Edwin Starr, "Absolutely Nothin'".  Yesterday. Janet Yellen announced a .25 increase in the Fed funds rate, and those in the real estate industry seemed quick to scare the pants off of potential home buyers by telling them the Fed is eating into their buying power.


     The reality is, the Fed's rate moves have little to no actual or immediate The Fed Raises Mortgage Ratesimpact on the mortgage market.  Like so many other areas of the global economy and geopolitical environment (commodity trading, natural disasters, wars, Brexits, Grexits, and jobs reports), there is a residual and indirect impact, but that's the case with just about everything these days.  What the Fed funds rate does impact is the amount of interest charged to banks borrowing from the Fed & each other.  For this reason, the Fed move has a direct impact on the prime rate (tied to credit cards, lines of credit, and other variable rate debt instruments), so a Fed move will affect things there, but the impact is nowhere even close to the impact that would be felt if that could unilaterally increase mortgage rates by .25 with the wave of a wand.


     To illustrate this further, let's look at what happened when the Fed made their announcement.  Mortgage bonds improved more than they have in months (on a single day basis), and mortgage rates actually dropped by nearly .25.  So while fear mongering agents and ignorant mortgage "professionals" are telling people how much their buying power will be hurt, buying power actually improved immediately.  


     The problem with selling fear is that for every person that buys into it, there's another who sees right through you, and thinks you either ignorant, or worse, a crook.  So if you're spouting off these warnings with false information, which are you?  


     The reality of the marketplace is rates are heading up and it doesn't look like that trend is stopping any time soon.  So go ahead and spread the word, discuss decreases in buying power, and why it's important to buy now (if you think it is).  But don't blame the Fed.  Blame inflation.  Blame a roaring economy and jobs numbers that haven't looked so good since the 70's.  Blame it on a rolling back of regulations and a more business-friendly administration.  Blame it on something that, in reality, is having a direct effect on the rates.  But don't go fear mongering over the Fed, because in doing so, you're wrong.  Your information is wrong, and spreading it around for personal benefit makes you either ignorant, or a crook. 

John Meussner

NMLS# 138061

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Virginia Fairfax County Alexandria Kingstowne
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Anita Clark
ColdwellBanker SSK Realtors ~ 478.960.8055 - Warner Robins, GA
Realtor - Homes for Sale in Warner Robins GA

An often misunderstood topic that John does a great job of explaining. Good reblog choice, Amanda.

Mar 17, 2017 02:28 PM #1
John Meussner
Mason-McDuffie Mortgage, Conventional Loans, Jumbo Loans, FHA, 203(k), USDA, VA, - Walnut Creek, CA
#MortgageMadeEasy Walnut Creek, CA 484-680-4852

Thanks Amanda, appreciate you spreading the word!

Mar 17, 2017 03:44 PM #2
Dorie Dillard
Coldwell Banker United Realtors® ~ 512.346.1799 - Austin, TX
Serving Buyers & Sellers in NW Austin Real Estate

Good evening Amanda S. Davidson ,

How did I miss this post? Thank you for re-blogging this..excellent post by John Meussner!!

Mar 17, 2017 04:20 PM #3
Gita Bantwal
RE/MAX Centre Realtors - Warwick, PA
REALTOR,ABR,CRS,SRES,GRI - Bucks County & Philadel

Thank you for reblogging the post. I hope others will read it too 

Mar 17, 2017 07:40 PM #4
Noah Seidenberg
Coldwell Banker - Evanston, IL
Chicagoland and Suburbs (800) 858-7917

Great choice for a re-blog Amanda.

Mar 17, 2017 10:33 PM #5
Gabe Sanders
Real Estate of Florida specializing in Martin County Residential Homes, Condos and Land Sales - Stuart, FL
Stuart Florida Real Estate

Excellent choice of a re-blog, Amanda.  This information is very timely right now.

Mar 18, 2017 05:17 AM #6
Joan Cox
Metro Brokers - House to Home, Inc. - Denver Real Estate - 720-231-6373 - Denver, CO
Denver Real Estate - Selling One Home at a Time

Amanda, great post to re-blog, as the public does believe the rate increases will have a direct impact on the interest rates.

Mar 18, 2017 05:24 AM #7
Amanda S. Davidson
Amanda Davidson Real Estate Group - Alexandria, VA
Alexandria Virginia Homes For Sale

John really did a great job with this post. I'm glad you all enjoyed the re-blog!

Mar 18, 2017 03:31 PM #8
Rebecca Gaujot, Realtor®
Perry Wellington Realty, Adam Conrad, Broker - Lewisburg, WV
Lewisburg WV, the go to agent for all real estate

 Amanda, excellent reblog choice. John did a great job of explaining this topic.

Mar 18, 2017 05:52 PM #9
Debbie Reynolds
Platinum Properties - Clarksville, TN
Your Dedicated Clarksville TN Real Estate Agent

It used to move right along with Fed changes but now so much more is involved. Great choice of a reblog and topic that is on the minds of so many.

Mar 20, 2017 05:55 AM #10
Will Hamm
Hamm Homes - Aurora, CO
"Where There's a Will, There's a Way!"

Hello Amanda,  Great re-blog and I missed it first time around.  Make it a great day!


Mar 21, 2017 09:18 AM #11
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