Sep 10
2
We’re in the market for a house, and it would seem that the lowering Fed rate would trickle down to the mortgage business. Instead, those rates keep going UP! How do they expect people to help out the economy by buying homes when they keep making it so unattainable and unattractive?
Mortgage rates are not driven by fed rates. They are driven by the bond market, which competes with mortgage backed securities for capital. Investors need to buy the mortgages from the originators, and the rates are determined by their pricing models. As a previous poster noted, mortgage rates follow the 10 year treasury most closely. The spread between the 10 year and mortgage rates has been increasing due to increased fears of inflation (which the fed cuts make even worse) and the general perceived riskiness in the mortgage market (forclosure rate?). As such, investors are saying they’d rather invest in other securities because the rates are not paying them enough for the risk they are taking. That is why rates sometimes go up when the fed cuts.
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