How Fed Rate Cuts Effects Mortgage Interest Rates

Real Estate Agent with Keller Williams

I didn't write the following explaination my friend and lender Brett Swearingen did. But I thought it was so great I wanted to share it all with you.  I hope this helps you understand the mortgage market a little better. Brett's contact information is below. He has a great website too.  

I hope this helps you when clients ask you this question.

Many people are call in about refinancing due to the FED cutting rates. Yes, rates are good. Possibly low enough to refinance, depending on the situation. However rates have been going up!

The Federal Reserve has been on a rate cutting spree once more. Many mortgage applicants are calling their mortgage representative and expecting a lower interest rate. Others who have been waiting to refinance are puzzled as to why mortgage rates have not moved lower during the recent five Fed rate cuts. This is difficult to explain to consumers who have watched a 2.25% reduction by the Fed with very little benefit in mortgage rates.

Is a Fed rate cut really good news for mortgage rates? The facts may be surprising. The Fed can only control the Discount Rate and the Fed Funds Rate. This is very different from mortgage rates.  A mortgage rate can be in effect for 30-years while a rate set by the Fed can change from one day to another.

It is often said history repeats itself. And if history is any teacher, we can learn from what happened to mortgage rates the last time the Federal Reserve was in a rate-cutting cycle.

Brett Swearingen, CMPS CMA
Swearingen Mortgage Group,
Div. of: Vanguard M&T
2223 East Skelly Drive, Suite 10
Tulsa, OK. 74105
Remember: At 211° water is hot. At 212°, it boils. The one extra degree of service and mortgage solutions, makes the difference.

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