Feds have opposite impact on mortgage rates

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blog-author-clayjeffreys3

Seems the increase of the Federal Funding Rate didn’t have the negative impact on mortgage rates that many of us read about/heard about in the media. Since the Feds increased the Federal Funding Rate, mortgage rates have improved by at least 0.375%. Mortgage rates now sit at their lowest point since the beginning of 2015.

CEO-PIC

As bonds values go up, mortgage rates go down.

Why did mortgage rates improve if the Federal Funding Rate increased by 0.250%?

As previously discussed in this blog, mortgage rates are determined by mortgage backed security bonds. As these bond values trade, mortgage rates change… when bond values go up, rates go down and vice-versa. Also, when stocks endure bad times, bonds excel. This means as stock values drop, bond values rise, and in-turn, mortgage rates improve.

We all know what happened on Wall Street in January/early February. The Dow posted some historically bad numbers. Whether people were afraid of the price of oil, the oil glut, the Feds raising the Federal Funding Rate, or something else, stock prices plummeted, and so too did mortgage rates.

How should consumers respond:

  1. Don’t worry about interest rates getting better after you’ve locked in a rate. We have a float down option on our rate locks. If rates improve, your locked rate may be able to improve too. The rate will not get worse so long as it is locked. In other words, your rate could get better, but not worse. I’ve had several clients take advantage of this feature in the past two months.
  2. If you are thinking of buying a home (or refinancing), now would be a good time to get serious about it. Mortgage rates are not far off of their all time historic lows. Even if rates improve, you can use the float down option I just described.

Looking to buy/refinance a home in the state of Georgia, contact me today to get started. We’ll get through the prequalification process and get you ready to buy your new home!

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