Comments Off on Why It May Be Prudent To Lock Your Mortgage Rate Before 2:15 P.M. ET Today

Why It May Be Prudent To Lock Your Mortgage Rate Before 2:15 P.M. ET Today

2008
08.05

The Federal Open Market Committee meets today and is widely expected to hold the Federal Funds Rate at 2.000 percent.

This does not mean that mortgage rates will stay flat, too, however.

The Fed Funds Rate is a different type of interest rate from the ones charged to American homeowners for their mortgages.

The Fed Funds Rate is an interest rate paid for an overnight loan between banks; it’s the shortest-of-short-term loans made to borrowers with exceedingly deep reserves.

By contrast, mortgage loans are borrowed over 30 years and are offered to borrowers of all credit types.

If the direction of the Fed Funds Rate and of mortgage rates were truly related, the chart above wouldn’t show mortgage rates rising throughout the 12 months ending February 2008 while the Fed Funds Rate fell by 2.250 percent.

So, just because the Fed Funds Rate may remain on pause today doesn’t mean that mortgage rates will, too. Mortgage rates are notoriously volatile post-Fed announcements.

Mortgage rate shoppers may be prudent to lock in ahead of Ben Bernanke and Company’s 2:15 P.M. ET press release.

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