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upaloopa

(11,417 posts)
Thu Dec 17, 2015, 02:38 PM Dec 2015

Fed Rate Goes Up. Mortgage Rates Go Down

http://www.mortgagenewsdaily.com/consumer_rates/543379.aspx

Fed Rate Goes Up. Mortgage Rates Go Down

Dec 16 2015, 6:40PM

Mortgage rates moved just slightly lower today, despite the long-awaited Fed rate hike. Once again, that's LOWER mortgage rates and a HIGHER Fed rate. Here's how that works:

The rate that moved higher today is the Federal Reserve's Target Rate. This is the rate banks charge other banks to borrow money overnight. It's called the Fed's Target Rate, because the Fed doesn't actually directly enforce the rate. It merely "targets" the rate (or the range of rates, in this case) that it believes is in line with its policy goals. The Fed can then employ several tools to influence the overnight rate and bring it in line with the target range.

If you're not already well-versed in the reasons that banks borrow from other banks overnight, don't worry about that. All you need to know is that the Fed's target rate is vastly important to the global financial system, and it has far-reaching effects on all manner of interest rates.

In other words, a Fed rate hike is a big deal, but bigger to some than others. Mortgage rates are less directly connected to the Fed's Target Rate, as could be easily seen in today's modest move lower. The Fed hiked its rate by a quarter of a point--an amount that would be unimaginably severe in the mortgage world. Such a move has only happened a few times in history on a single day.
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merrily

(45,251 posts)
1. The fed rate since 2008--one more way to make sure the rich get richer.
Thu Dec 17, 2015, 02:42 PM
Dec 2015

Thanks for this info. Good to know that mortgage rates went down.

 

GummyBearz

(2,931 posts)
4. I closed on my first house this summer, the rate didn't lock until the week of
Thu Dec 17, 2015, 04:23 PM
Dec 2015

Other states, lenders, etc. may vary of course

Waldorf

(654 posts)
8. No, not yet. I thought he would have to before the builder would even start on the house but
Thu Dec 17, 2015, 06:27 PM
Dec 2015

he won't get it until closing.

upaloopa

(11,417 posts)
9. For me it was within 30 days of estimated closing date
Thu Dec 17, 2015, 06:39 PM
Dec 2015

I could chose to lock any time in that frame

Watch the long bond
The 10 year treasury bond that is the best predictor of mortgage rates
As the bond yield goes up or down mortgage rates also go up or down

 

GummyBearz

(2,931 posts)
5. It is interesting to me personally.
Thu Dec 17, 2015, 04:30 PM
Dec 2015

I thought mortgage rates would edge up after the announcement. The common answer when things don't work out the way it makes sense is "it was already baked into the price".

I would really like to refi as my rate was locked in during a brief peak in rates and I can't refi until Feb... If it stays steady at its current rate, I can refi and save $150/month. This was my first mortgage experience, and all the banks told me "we don't know what the rate is you will get, it locks in on the day it closes". I think I will try to use the inverse of that line when I deal with the banks again for the refi. "I don't know what day I will refi, it depends on the rate you can lock in".

upaloopa

(11,417 posts)
7. I am in CA and had a mortgage broker to work with.
Thu Dec 17, 2015, 04:57 PM
Dec 2015

We closed on June 11 of this year. It was up to me to tell him when I wanted to lock in a rate as long as it was within 30 days of the expected close date.

 

GummyBearz

(2,931 posts)
11. Yea that sounds like what they pitched to me as well
Thu Dec 17, 2015, 06:57 PM
Dec 2015

The way it worked in my case was that the bank kept delaying over and over until we were at the point where our offer could be walked away from by the seller if we delayed one more day. Then the bank said "ok this is the rate today. you want it or you want to break contract?"... which was not much of a choice, given the dollars we already put into the effort at that point :|

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