Mortgage rates have dropped sharply in recent weeks. When the Federal Reserve cuts interest rates, it rarely has a clear or predictable impact on mortgage rates. So, it's impossible to say how soon -- or even if -- mortgage rates will fall more as a result of the Fed's latest move.
How soon could it affect you? |
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Mortgage rates have dropped sharply in recent weeks. When the Federal Reserve cuts interest rates, it rarely has a clear or predictable impact on mortgage rates. So, it's impossible to say how soon -- or even if -- mortgage rates will fall more as a result of the Fed's latest move.
Nonetheless, many economists expect rates to continue their descent if the economy weakens further.
“A lot of people are moving into the safety of bonds and Treasuries and out of equities and housing.”
"A lot of people are moving into the safety of bonds and Treasuries and out of equities and housing," says Bob Walters, chief economist for Quicken Loans. "So, you've seen a shift of asset allocation on a national and global level."
As investors flee to such conservative investments, yields fall, forcing long-term rates -- including mortgage rates -- down.
Conclusion
Cuts in the federal funds rate do not directly determine the future direction of mortgage rates. However, mortgage rates have been falling, a trend that is likely to continue until the markets see signs that the economy is turning around.
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Fed announcement: June 24, 2009
