Understanding the Mortgage Market | Dropping Rates?

Mortgage and Lending with Your Tampa Bay Mortgage Source

Istock_000003731985small Mortgage Rates Dropping...What's the lowest rate? This topic is a conversation I am having at least 5 times a day from Michigan to Florida.  So, I figured let's get the information all out on the blog and via the e-zine and we'll all be on the same page!

The conversation goes like this....you ask: "Leah, I heard mortgage rates are dropping...I saw on the news and in the paper that they are going to drop the interest rates again by another quarter of a point...How low are they going to drop?"

Now, my response...keep in mind I try to keep it simple and not to heavy on the economics: "Actually, this is a very confusing topic.  The majority of what you are hearing on TV and seeing in the newspaper is talking about the Fed Funds Rate or the Discount Rate.  This is what the "Fed" controls.  This is the rate that has been dropping recently.  We call this rate the short term rate.  Short term rates affect loans that are based on the Prime Rate, most likely home equity lines of credit."

"What controls our 15, 20, and 30 year fixed mortgages, or what we call the long term rate, is the bond market.  These two rates are not directly tied together.  When the Fed cuts the short term rate, it doesn't have a direct impact on the long-term rates, rather the bond market dictates long term rates.  The Fed has been dropping the short term rate to keep inflation in check.  It's when the bond investors think the Fed is letting inflation get out of control that the long the long term rate is affected."

It's really a matter of economics and understanding this small piece will hopefully give some insight on when is the best time to purchase or refinance.  Rates are still low although we've seen them rise the past month.  If you'd like to know if it makes sense to do something for your particular situation, have concerns about a refinance or just want some honest information, please give me a call.  As your mortgage consultant I'm here to take the mystery out of the mortgage market, answer your questions and "pilot" you through the turbulence of financing or refinancing your home.

If you're receiving mortgage solicitations in the mail and on the phone and need some home understanding them, I'd welcome the opportunity to act as your interpreter and give you the facts!


Your Tampa Bay Mortgage Professional

Leah Ross, XCO, AmeriFirst Home Mortgage

Please feel free to contact me via email at LRoss@AmeriFirst.com or Phone 813-643-8430 or 269-488-9527.

Comments (4)

Michael Delp
Mortgage Pro - Telford, PA

These days it is a little hard to explain the rates. Usually mortgage rates would follow the 10 year treasury, however the margin has been growing to the point that the rates don't always jive with what the market is doing.

Feb 28, 2008 03:35 AM
Matthew J Blum - (retired from the business)
Palm Beach Gardens, FL
Leah, Great Post. I am so happy to see you posting again. Does this mean we will see more of your great posts?
Feb 28, 2008 04:07 AM
Neal Bloom
Brokered by eXp Realty LLC - Weston, FL
Realtor CRS-Weston FL Real Estate
They must be dropping...a buyer purchasing a listing we have got a 30 year fixed at 5.3%...sounds like a good rate to me for this time of year.
Feb 29, 2008 11:20 PM
Diane Bell, Hilton Head Real Estate, Bluffton
Charter 1 Real Estate, Hilton Head, Bluffton, SC - Hilton Head Island, SC


Good explanation.  People just assume that rates will drop 5 minutes after the Fed makes a move.  Ah, wouldn't it be nice if life was so simple?

Feb 29, 2008 11:26 PM