Federal Reserve Rates are not Mortgage Rates

March 16, 2020 12:00 am

Federal Reserve Rates versus Mortgage Rates diagram with an apple and an orange

The Federal Reserve had an emergency meeting this past weekend and decided to reduce the Federal Reserve rate to nearly 0%. Seeing the news, many people thought this would translate to 0% mortgage rates, but that is not the case. We are going to see in the coming days what impact the drop will have on mortgage rates, but the Federal Reserve rate and mortgage rates are not one and the same.

The Fed doesn’t set mortgage rates, but it does determine the federal funds rate, which impacts short-term and variable interest rates such as small business loans, car loans and lines of credit. The Federal Reserve rate is the rate at which banks lend each other money, so think about it like short-term money borrowing. This will help businesses that have seen and will continue to see reduced revenue from decreased sales, and the new rate will help businesses make payroll for employees being out for sickness due to COVID-19.

Mortgage rates are based on the MBS (mortgage-backed security) market — which is independent from the treasury bond as well as the stock market but typically reacts within certain tolerances of those financial markets. Rates can be higher or lower on any given day, which is why in times like these, having professional advice is critical. My job as your mortgage planner is to help you proactively be in position to lock your rate when the time is right in the coming weeks and months.

We are far more than flashy ads that promise you the lowest rates. My job is to guide your largest financial decision — your home mortgage investment — and I take that job very seriously. Whether we have already discussed a refinance or you just want to ask questions, having a trusted guide is imperative during these uncertain times.

I assure you that you are in very good hands and that I will be staying on top of the best industry information and latest news in the coming weeks. We will work together to decide when it is best for you to make the right decision for your future, but I am 100% committed to ensuring you make a very educated choice for your home loan.

In the days to come, we will see what impact the Federal Reserve’s actions may have on mortgage rates but rest assured that you can count on my team’s expertise and this company to work tirelessly on your behalf. Our goal is accurate and timely information you can trust.

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