Why do mortgage rates keep going up after the Fed lowers their interest rate?

We're in the market for a house, and it would seem that the lowering Fed rate would trickle down to the mortgage business. Instead, those rates keep going UP! How do they expect people to help out the economy by buying homes when they keep making it so unattainable and unattractive?Why do mortgage rates keep going up after the Fed lowers their interest rate?
Mortgage rates are not driven by fed rates. They are driven by the bond market, which competes with mortgage backed securities for capital. Investors need to buy the mortgages from the originators, and the rates are determined by their pricing models.





As a previous poster noted, mortgage rates follow the 10 year treasury most closely. The spread between the 10 year and mortgage rates has been increasing due to increased fears of inflation (which the fed cuts make even worse) and the general perceived riskiness in the mortgage market (forclosure rate?). As such, investors are saying they'd rather invest in other securities because the rates are not paying them enough for the risk they are taking. That is why rates sometimes go up when the fed cuts.Why do mortgage rates keep going up after the Fed lowers their interest rate?
So you still believe in the 'trickle down' theory, huh? You must have voted for Bush. The banks are sticking the extra profits in their pockets. That's what corporations do. Do you think they give a crap about you? Hahahaha!
Bank have gotten hit hard by people that have walked away from their homes and they are having to sell these homes they forclose on for less than is owed. So the banks are keeping the extra differnce in rates to increase their profits and make back some of that money they have lost in the last year.





Government is actually pretty pissed about this, but the banks want their money back.
Lowering the Fed rate primarily effects the amount of interest banks and financial institutions charge each other when they borrow money from each other and from the Fed. In checking recently, mortgage rates are holding pretty steady, not going up or down. If the rates that you are being quoted are going up, you might want to check your credit score. If you have good credit and good debt to income ratio, you should be able to get a mortgage between 5.5 and 6% right now and frankly those are great rates.
Its going to take A LONG TIME - MONTHS - before the general public feels the effects of any rate cut.





Those rates are for the transactions between


A] banks


B] and the banks to the Fed


C] and/or the Fed to the banks.





Thanks for asking your Q! I enjoyed answering it!





VTY,


Ron Berue


Yes, that is my real last name!
Mortgage rates are more closely tied to the 10-Year Treasury Note and *not* to the Federal Funds Rate. Due to the AVAILABILITY of credit, mortgages have not dropped as much as they have in the past. The spread between mortgage rates and the 10yr Treasury is about 1/2% larger than normal.





Ronald Reagan's ';trickle-down economic theory'; (actually Arthur Laffer's) reminds me of what my middle school social studies teacher said back in the 70s about slavery. He told graphic stories of the conditions slaves faced on the boats to America. The slaves were shackled to different ';shelves'; in the hull of the boat and all their urine and feces would trickle down from the top to the poor schmucks below. That graphic story paints Trickle Down Economics in a whole new light.

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