Well....they did it again...they lowered the interest rates and would you believe mortgage rares actually went up? When the U.S. Federal Reserves lowers interest rates, they are lowering rates at which banks can borrow money from the US government to meet short term lending needs. Eventually, this may lead to lower mortgage rates as lenders pass on savings to consumers. However, that does not always happen.
Sometimes when rates are lowered, investors in US government bonds, known as treasuries, sell these relatively low yielding investments so they can buy stocks in an attempt to get a higher rate of return. When this happens, more Treasuries are available in the market which puts pressure on lenders to increase mortgage rates to cover the loss of interest generated by the loans they genreated at the former cheaper rates.
It is rather confusing, but just keep in mind, that when the Federal Reserve cuts rates, it does not always mean rates on mortgages are lowered. In fact, sometimes they go up as they did today. Last week 30 year fixed mortgages were about 6.125%. This week rates on 30 year fixed rate mortgages are about 6.4%. Talk to your lender for further clarification.
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