fed funds rate

Looking Back And Looking Ahead : March 17, 2008

March 17, 2008

Mortgage rates fell last week on growing evidence of a recession, but far fewer Americans were eligible to take advantage. Mortgage lenders continue to reduce product menus and that is leaving homeowners with fewer mortgage financing options than before. As an added hurdle, Fannie Mae and Freddie Mac recently added “risk-based” fees on all conforming […]

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Looking Back And Looking Ahead : March 3, 2008

March 3, 2008

Mortgage rates edged lower last week but it was another wild ride.  Market players continue to deal with competing economic forecasts. When the economy shows signs of brightness — like it did Monday and Tuesday — mortgage rates tend to rise. This is because markets are currently equating growth with inflation and inflation pressures mortgage […]

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As The Fed Funds Rate Falls, 30-Year Fixed Mortgages Rise

February 28, 2008

Federal Reserve Chairman Ben Bernanke testified to Congress Wednesday, alluded to further rate cuts to support an ailing U.S. economy. Already, the Federal Reserve has lowered the Fed Funds Rate by 2.250% since September 2007. The graph at right comes from the Wall Street Journal and it highlights a very important correlation between the Fed […]

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Looking Back And Looking Ahead : February 25, 2008

February 25, 2008

It’s a big week for mortgage markets (again) and that should cause rates to fluctuate wildly (again). The volatility we’ve seen since December has not been for the faint of heart.  Even this past Friday, as mortgage rates were poised to end the week lower, a late-afternoon stock market rally reversed it. In the last […]

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Looking Back And Looking Ahead : February 19, 2008

February 19, 2008

Early last week, mortgage rates rose on strong consumer spending and Warren Buffett’s offer to assume $800 billion in debt from three major bond insurers. Both reports were interpreted as signs of long-term strength in the economy, leading mortgage rates higher for long-term products such as the 20- and 30-year fixed rate mortgage. Meanwhile, Fed […]

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The Effect Of Fed Funds Rate Cuts On Mortgage Rates

February 15, 2008

As mortgage rates lurch higher this week, we have additional proof that cuts to the Fed Funds Rate do not lead to cuts in mortgage rates. Since the Federal Reserve’s surprise rate cut January 22, 2008: The Fed Funds Rate is lower by 1.250% The 30-year fixed rate mortgage is higher by approximately 0.750% Mortgage […]

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Looking Back And Looking Ahead : February 4, 2008

February 4, 2008

We entered the New Year uncertain of the country’s economic future. With January over, it’s a little more clear. Last week’s data and events helped firm expectations. In the near-term, we can expect weakness: The economy is shedding jobs Consumer sentiment is low Home sales continue to slump nationally In the intermediate-term, however, the picture […]

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Making English Out Of Fed-Speak (January 2008 Edition)

January 31, 2008

The Fed lowered the Fed Funds Rate by 0.500% to 3.000% yesterday.  The move was widely anticipated and so Wall Street’s reaction was muted. Because it is tied to the Fed Funds Rate, Prime Rate also fell by 0.500% yesterday.  Holders of home equity lines of credit and credit card debt benefited from the change […]

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History Is A Teacher: Cuts To The Fed Funds Rate Lead To Mortgage Rate Hikes

January 30, 2008

When the Federal Open Market Committee adjourns from its two-day meeting today, it is widely expected to lower the Fed Funds Rate. This does not mean that mortgage rates will fall. In fact, using history as an indicator, we should expect mortgage rates to rise if the Fed Funds Rate falls. Remember: The Fed Funds […]

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It’s A Good Day To Have Your Mortgage Adjust

January 23, 2008

When the Federal Reserve lowered the Fed Funds Rate by 0.75% yesterday, it was in response to economic weakness that mounted since its last meeting December 11, 2007. By contrast, the mortgage markets meet every day. Because of this, mortgage rates had already “priced in” the weakness to which the Fed was reacting. This is […]

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The Week In Review (January 22, 2008) : What To Watch For

January 22, 2008

As promised, last week was heavy on data and on drama.  And mortgage rates continued their slide lower. This week, by contrast, is devoid of data and markets are already digesting the Federal Reserve’s surprise 0.750% rate cut this morning. Mortgage rates are falling in response, but not because of what the Fed did as much […]

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Which Leads Which Lower: Mortgage Rates Or The Fed Funds Rate?

January 16, 2008

It’s a point that’s always worth repeating: Ben Bernanke and the Federal Reserve do not control mortgage rates This is particularly relevant today as newspapers, television programs, and market pundits posit that the U.S. is in the midst of a recession. The latest evidence supporting that assertion is that Retail Sales grew at its slowest […]

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Americans Are $6.25 Billion More Wealthy Since September Because Of The Federal Reserve

January 8, 2008

Since September 2007, the Federal Reserve has lowered the Fed Funds Rate by 1.000%. This has caused Prime Rate to fall by 1.000%, too.  This is because the Fed Funds Rate and Prime Rate are directly related. In mathematical terms, the relationship looks like this: (Prime Rate) = (Fed Funds Rate) + (3.000%) So, because […]

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$100 Oil Could Mean More Than High Gas Prices For Americans

January 3, 2008

The price of oil briefly touched $100 per barrel yesterday, just short of the all-time inflation-adjusted high of $102.81 in April 1980. According to economic forecasting firm Global Insight, each $10-per-barrel increase in oil prices: Increases gas prices by 19 per gallon Cuts consumer spending by one-third of a percent Reduces employment by 100,000 Adds […]

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Making English Out Of Fed-Speak (December 2007 Edition)

December 12, 2007

The Fed lowered the Fed Funds Rate by 0.250%.  The rate decrease was not well-received, though, as many investors were calling for a deeper cut of a half-percent. In response, dollars moved from stock markets to bond markets and, therefore, mortgage rates fell. Because it is tied to the Fed Funds Rate, Prime Rate fell by […]

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Why Credit Card Holders May Benefit From The Fed’s Actions Today

December 11, 2007

The Federal Open Market Committee meets today and will release a public statement at 2:15 P.M. ET. It is widely expected that the FOMC will lower the Fed Funds Rate by at least 0.250%. When the FOMC lowers the Fed Funds Rate, it is trying to “loosen” credit for American businesses and consumers.  When credit […]

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The Week In Review (December 10, 2007) : What To Watch For

December 10, 2007

Among lingering doubts about housing and credit markets, and a general uncertainty about the U.S. economy, the mortgage bond market tanked towards the latter part of last week. As investors moved away from mortgage bonds, mortgage rates forcefully bounced off their two-year lows. A major factor behind last week’s run-up in rates is the market […]

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The Week In Review (December 3, 2007) : What To Watch For

December 3, 2007

If you enjoy roller coaster rides, last week’s mortgage markets were a delight.  Up and down mortgage rates went, trying to find a balance between inflation and recession (or maybe neither). A major cue for markets last week came from a high-ranking Fed official who raised expectations for future cuts to the Fed Funds Rate.  […]

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On Random Rate Rallies And Thin Trading

November 20, 2007

Mortgage bonds staged a late-day rally yesterday, exaggerated by the holiday-shortened week and because trader participation is light. (We’ll revisit this theme several times between now and the New Year so don’t get tired of it.) When mortgage bonds rally, it means that demand for them is strong and that pushes mortgage rates down. Unfortunately for […]

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The Week In Review (November 13, 2007) : What To Watch For

November 13, 2007

The Dow Jones Industrial Average and NASDAQ shed 4.1% and 6.5%, respectively, last week. Normally, this would be good news for mortgage rates because investors tend to look for “safe havens” in bond issues, but instead, just treasuries benefited last week.  Mortgage bonds were left in the dust. Mortgage rates finished to the upside after […]

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