How Fed Cuts Affect Mortgage Rates

It's not true that Fed cuts reduce mortgage rates, regardless of how many times you hear it, says my expert, Dan Tharp.

According to Mr. Tharp, when the Federal Reserve Bank announces a big reduction in rates, say, 50 basis points or more, that action can actually cause 30-year-fixed rates to initially go up. That's because mortgage rates aren't tied to T-bills, like many people erroneously believe.

Trying to predict which way mortgage rates will move, though, is a little bit like throwing darts at a moving target board. The lenders I work with often tell me that rates can fluctuate wildly throughout the day. Rates can be up in the morning, drop over lunch and go back up within a course of a few hours.

Agents and lenders advise buyers to lock a loan rate when rates appear attractive. But the thing in the back of every buyer's mind is what if rates go down? That's a big consideration. But what if rates go up? What could cause rates to go up? Many real estate professionals, including some loan reps, do not fully comprehend how mortgage rates are determined and how Fed cuts affect mortgage rates. There's a myth perpetrated within the industry that rates always go down following a Fed cut . . . read more about Fed Cuts Affect on Mortgage Rates.

More Articles by Elizabeth Weintraub, click below:

• How to Stop Trigger Leads
  
• Places to Get a Mortgage
  
• The Best Time to Lock a Loan

_{©Big Stock Photo}

Technorati tag: fed cuts mortgage rates