WHAT ABOUT INTEREST RATES FOR MORTGAGES???

According to several National Surveys of mortgage rates, for the 4th week in a row we have seen a decrease in rates for home loans. In fact, they say, it's the sixth time in seven weeks the rates have droped from previous highs.
There are a number of economic reasons why the rates slowed down and reversed the upward trend. Claimed to be the number one reason is the slow dowm in the rate of inflation. Even though the index used to measure this did not react exactly as the leading economists expected, nationally, base wholesale prices for goods fell and Retail prices went up...but not quite as high as projected.
Since BONDS are the central core of movement for Mortgage rates, we need to keep watch on what happens in the Bond markets. As a result of the slow down of the rate of inflation, the trickle down effect on the Bond market was recognized as a movement downward of Bond Yields.

Mortgage Rates move down(most of the time) when Bond Yields go down. Bonds work in reverse of most other financial instruments. When BOND RATES go UP...Bond Yields come down...and so does Mortgage rates.

Most people think that the FED announced rate changes are Mortgage Rate changes. Not So..at least directly. The Fed moves the Fed Discount Rate...thats the rate Banks charge/pay each other for overnight deposited Bank funds. An increase in the Fed Discount rate is usually immediately followed by an increase in PRIME rate...the interest rate charged on most Business loans, many HELOC'S, and some others. Mortgage Rates are generally only affected by the Fed Rate increase if that increase dominates other financial markets that move the Yield on Bonds up or down.

Since the Feds last meeting, where they held short term rates(as it is called) , it has given a glimmer of hope to Realtors and Mortgage Bankers that this Fed move will be the spark that ignites even more real Estate sales...And more Mortgages...Which, by the way in my opinion, is the best way fore this country to foster a continued healthy economic future.

Chuck Kabis, MRA
Certified Mortgage Consultant
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