Monday 17 December 2012

Mortgage Rates

Mortgage Rates

It would be incorrect to state that there is a *direct* relationship between fixed mortgage rates and the Fed Funds rate, but there definitely is significant correlation between the two. Lots of things usually happen when the Fed cuts rates; I say usually,since things are working a bit differently now given that the market seems psychologically bounded. Ok,Fed cuts rates,the costs of lending goes down for banks on a short-term basis. So,of course,the rate on a 30-year mortgage isn’t going to drop lock-step with a near quarterly-adjusted OVERNIGHT rate,but the correlation IS there because of its impact on the capital markets as a whole and, in more recent years,due to utter disregard for responsible risk management.A better benchmark would be the yield on a 10Y treasury bill. The yield for these tend to correlate very strongly with the 30Y mortgage rate since 10 years is how long it takes,on average,for these mortgages to be paid off.

Mortgage Rates

Mortgage Rates

Mortgage Rates

 Mortgage Rates

Mortgage Rates

Mortgage Rates

Mortgage Rates

Mortgage Rates

Mortgage Rates

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