What everyone ought to know about changing mortgage rates

We as real estate professionals are asked all the time about the relationship between what is called the Federal Funds Rate (fed rate for short), and mortgage rates. The most common question is "I heard on the news that the government lowered the fed rate, so will mortgage rates come down?" To answer that question, we first need to look at how and by whom each of these rates is determined.

The Federal Runds Rate is the interest rate the Federal Reserve Banks charge depository institutions on overnight loans. The fed rate is an administered rate, set by the Federal Reserve Banks, rather than a market rate of interest. The fed rate acts as the gas pedal for our economy. Lowering this rate ...

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