With the Fed Funds Rate Now At Only 1.5%, Why Are Mortgage Rates Still At 6%?

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Real Estate Appraiser with Accurate Valuations Group, LLC LA St Certified 851

http://batonrougerealestateappraisers.com/ - With the Fed Funds Rate Now At Only 1.5%, Why Are Mortgage Rates Still At 6%?

The Federal Funds rate is now only 1.5%......meaning banks pay 1.5% for the money and lend this money for home loans/mortgages at the current 6%. This is INSANE that mortgage rates are still at 6% when the lenders are getting this money from the Fed at 1.5%.  Mortgage rates were 6% when the fed funds rate was 2%, 2.5%, 3%, 4%, 5%.  If the fed funds rate has dropped so far, then why aren't mortgage rates falling with this drop?   It's just like the question of oil. Oil went to $140s per barrel and closed yesterday at $86/barrel. Why did I still have to pay $3.559 yesterday for a gallon of gas when oil per prices per barrel have dropped by 39%?  (I heard on the radio that gas is $2.95/gallon in Hattiesburg, MS.)   Mortgage rates should be in the 4.5% to 5% range to help this economy.  Aren't lower rates better than gazillions in bailouts?   After all, the US Government Now Owns Fannie Mae, Freddie Mac and FHA.....surely they could act to manipulate the market and bring down mortgage rates just as they are manipulating other markets - like placing a halt on short selling of banking stocks!   Bring down mortgage rates now!  

Perhaps I'm not as educated about this topic as I should be.  Help educate me!

See this short CNBC video of Fixing Housing: http://www.cnbc.com/id/15840232?video=875735311&play=1

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Bill Cobb

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