Live Rate Quotes No social security number required
Real Estate Chart of the Day
Mortgage rates and markets change constantly. Stay 100% current by taking The Mortgage Reports by email each day. Click here to get free email alerts, or subscribe to the RSS feed in your browser.
The Federal Reserve adjourns from a 2-day meeting today and mortgage rates are expected to change. Up or down? We're still unsure -- it depends on what the Fed says to the markets.
It's a good time to lock your mortgage rate. Rates have more room to rise than to fall.
Click here to get a mortgage rate.
The Federal Reserve is the government group that makes our nation's monetary policy. The Federal Reserve's role is akin to gas-and-brake pedals on a car -- the Fed speeds up or slows down the metaphorical vehicle that is the U.S. economy.
Within the Federal Reserve, there is a rotating sub-committee called the Federal Open Market Committee. The Federal Open Market Committee has 12 members and is headed by Chairman Ben Bernanke.
The Federal Reserve meets 8 times annually to discuss a host of economic issues. When the meeting is complete, the FOMC sub-committee then votes on whether to raise, lower, or leave unchanged an interest rate called the Fed Funds Rate; and whether to implement other economic stimulus programs.
These "other" programs have gone by names such as "The Mortgage Market Purchase Program", "QE2", and "Operation Twist" and each has expanded the Federal Reserve's reach and influence over the economy and over mortgage rates. However, the Fed Funds Rate remains most common and well-known monetary policy tool.
The Fed Funds Rate is the prescribed interest rate at which banks lend money to each other overnight.
Grossly simplified, when the Fed Funds Rate is high, borrowing is more expensive, which acts as a brake on the U.S. economy. When the Fed Funds Rate is low, borrowing is cheap, and the economy is spurred into growth.
The Fed Funds Rate has been near 0.000 percent since December 2008 -- more than 3 years.
The FOMC closes a 2-day meeting today, adjourning at 12:30 PM ET.
The group is expected to leave its Fed Funds Rate unchanged within its current range of 0.000-0.250 percent and will likely issue guidance that the Fed Funds Rate will remain near zero percent until at least 2014 to promote continued economic growth.
That doesn't mean mortgage rates will stay low until 2014, however. Mortgage rates and the Fed Funds Rate have two very different masters. Mortgage rates are born from Wall Street trading pits; the combined product of economic development, political expectation, and U.S. dollar valuation.
By contrast, the Fed Funds Rate is set by government committee.
The relationship between the Fed Funds Rate and the 30-year fixed rate mortgage is indirect, at best. The difference in the benchmark rates has been as narrow as 1 percent and as wide as 5 percent in just the last 10 years. There were even periods in the 1970s and 1980s when the spread went negative; where mortgage rates were lower than the Fed Funds Rate.
In general, we find the following relationship :
Today, the economy is heating up. We should expect, therefore, for mortgage rates to rise long before the Fed Funds Rate. We're already seeing it now, in fact.
If you're shopping for a mortgage right now, or otherwise not locked in, consider making a plan. When the Federal Reserve speaks, mortgage markets listen. It's not uncommon for mortgage rates to move by as much as a half-percent in the weeks following an FOMC meeting.
Today, mortgage rates may rise. Or, they may fall. We can't know which but we do know that it stinks to be on the wrong side of that bet like that. Especially with a mortgage loan at stake.
Get yourself a rate quote and lock it in today. Once low rates are gone, they'll be gone forever.
Dan Green (NMLS #227607) is an active loan officer with Waterstone Mortgage. Email Dan ator click to get a free, no-obligation rate quote.
You can also find Dan on Twitter and Google+.
Since you have reached the end of this post, you may be interested in checking out the related posts below.
