Blog > How Fed Policy Can Affect Mortgage Rates
The Federal Reserve’s changes to the Fed Funds Rate can have a significant impact on mortgage interest rates, and it’s important to understand what’s happening in the markets to know when it’s a good time to get a mortgage.
The Fed Funds Rate is a key tool used by the Federal Reserve to help manage the nation’s monetary policy. It is the rate at which banks lend money to one another overnight from the Federal Reserve’s reserve accounts. The Federal Reserve sets a target rate, and the market rate, which is the actual rate that banks lend and borrow from one another, tracks the target rate.
When the Fed Funds Rate is lowered, it is typically an indication that the Federal Reserve is trying to stimulate the economy. This can lead to an increase in borrowing and lending, as well as an increase in spending. This, in turn, leads to a decrease in mortgage rates. The opposite is true when the Fed Funds Rate is increased: it usually indicates the Federal Reserve is trying to slow down the economy, leading to a decrease in borrowing and lending, and ultimately a rise in mortgage rates.
Because of the connection between the Fed Funds Rate and mortgage rates, it’s important to be aware of what the Federal Reserve is doing with their policy changes. If the Federal Reserve is likely to increase the rate, it might be a good idea to lock in a rate before the increase happens. On the other hand, if the Federal Reserve is likely to decrease the rate, it could be a good time to shop around for a new mortgage.
It’s also important to keep in mind that the Fed Funds Rate isn’t the only factor that affects mortgage rates. Other factors, such as the strength of the economy and the level of inflation, can also have an impact. It’s important to do your research and understand the markets before making any decisions, as the Fed Funds Rate is just one factor in the larger picture.
Overall, it’s important to be aware of the Federal Reserve’s changes to the Fed Funds Rate, as these can affect mortgage interest rates. Understanding how the markets work and what the Federal Reserve’s policy is can help you make informed decisions about when to lock in a rate or shop around for a new mortgage.
The best way to stay informed is to create a close working relationship with a trustworthy mortgage lender. For Team Chadney, that person is Brigitte Erickson with Advantage Mortgage. She is fantastic with walking you through the loan process and the only person we recommend to all our clients. Brigitte can be reached at (503) 282-1882 or via email at [email protected]
Once you are approved for your loan, give Team Chadney a call at (503) 970-0858 to begin your home search in earnest!