What changes rates?

The federal funds rate, from which the prime rate is derived, is the target rate set by the Federal Open Market Committee. Since December 2008, the rate has been at a range of zero percent to 0.25 percent.

If the federal funds rate isn't moving but interest rates on various products are, what's driving rate changes? Below, Bankrate shows you what is causing rate changes in mortgages, home equity loans, auto loans, CDs and money market accounts, and credit cards.


Consumers hoping to see mortgage rates slide substantially in coming months may be disappointed, says Bob Walters, chief economist at Quicken Loans.

"There's going to be a slight pull toward higher rates," Walters says.

The 30-year fixed mortgage -- which fell to a 2009 low of 5.13 percent April 1 -- generally has moved higher and now stands at 5.65 percent.

Then and now
ProductRate on
Dec. 18, 2008
Rate on
Aug. 5, 2009
30-year fixed mortgage5.42%5.65%

Better economic news in recent weeks has caused a "sea change in perception" that is partially responsible for the rising rates, Walters says.

"People are starting to think we're bouncing off the bottom of the bad stuff here," he says. "Time will tell if that's accurate."

Mortgage rates typically follow the direction of long-term Treasury rates, which have climbed as markets anticipate that an improving economy will lead to future rate hikes by the Fed, Walters says.

"They've taken rates down to zero, (but) there will come a day when they've got to take the punch bowl away," he says.

Walters doesn't expect Fed tightening anytime soon, but acknowledges the difficulty of forecasting the next increase.

"Nobody has a perfect crystal ball," he says.

However, he urges mortgage shoppers not to wait, adding that the "gravitational pull" of rates is likely higher.

If you're dealing with other money problems, Bankrate can help. Read the Bankrate feature "How to solve 5 money problems."

Mortgage rates since Dec. 16, 2008

You can find mortgage rates using Bankrate's search tool.

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