Archive for January 30th, 2008

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


2008
01.30

When the Fed cuts the Fed Funds Rate, mortgage rates tend to rise

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 Rate is an overnight interest rate between banks; mortgage rates are long-term rates based on the bond market. These are two very different animals.

The FOMC’s press release hits the wires at 2:15 P.M. ET.