You may have noted the many recent news stories regarding rates being down due to the recent 'Fed cuts'. Unfortunately, the press often misinterprets the facts regarding how Fed cuts affect mortgage rates. Here is the way things really work: Fed cuts and mortgage rates are not directly related. In fact, when the Fed cuts short term rates, mortgage rates frequently spike (as Fed cuts are used to stimulate the economy which often drives money out of lower yielding bonds and into stocks). Aggressive cuts can also spark the fear of inflation which eats away at the value of bonds (pushing rates even higher). However, the Fed rate cuts do affect the Prime rate. The Prime rate is the short term rate that most home equity lines are tied to. So the good news is that borrowers will see an almost immediate drop in their equity line rates.