http://www.loanbiz.com/blog/2007/12/27/separating-what-matters-from-whats-hype/ Loan Business News, Information, and Consumer Education Thu, 17 May 2012 16:14:03 +0000 http://wordpress.org/?v=2.3.2 http://www.loanbiz.com/blog/2007/12/27/separating-what-matters-from-whats-hype/#comment-25 richard Tue, 29 Jan 2008 16:42:09 +0000 http://www.loanbiz.com/blog/2007/12/27/separating-what-matters-from-whats-hype/#comment-25 Far be it from me to differ with a Queen, let alone a Goddess, so let me note that I think we are basically in agreement -- that it is not the Fed driving down mortgage rates. That's why the Fed's action was one of my "hype" items. For more on the relationship between mortgage rates and the Fed -- including the "flight to quality" that you mention -- see last week's posting, "Whether or Not They Help the Economy, Lower Rates Are An Opportunity for Individuals". To link directly, go to: http://www.loanbiz.com/blog/2008/01/24/whether-or-not-they-help-the-economy-lower-rates-are-an-opportunity-for-individuals/#more-19 Far be it from me to differ with a Queen, let alone a Goddess, so let me note that I think we are basically in agreement — that it is not the Fed driving down mortgage rates. That’s why the Fed’s action was one of my “hype” items. For more on the relationship between mortgage rates and the Fed — including the “flight to quality” that you mention — see last week’s posting, “Whether or Not They Help the Economy, Lower Rates Are An Opportunity for Individuals”. To link directly, go to: http://www.loanbiz.com/blog/2008/01/24/whether-or-not-they-help-the-economy-lower-rates-are-an-opportunity-for-individuals/#more-19

]]> http://www.loanbiz.com/blog/2007/12/27/separating-what-matters-from-whats-hype/#comment-24 The Queen Tue, 29 Jan 2008 16:26:44 +0000 http://www.loanbiz.com/blog/2007/12/27/separating-what-matters-from-whats-hype/#comment-24 According the Mortgage Goddess, the Fed's changing the interest rate affects short term financing. Mortgages are long term loans and so aren't directly affected by a change. However, mortgages are driven by changes to the economy. What often happens is that the Fed lowers rates in response to unrest in stock markets. At the same time, unrest in equities often fuels a "flight to quality" or people investing in Treasury securities. When more people invest in these bonds, it drives interest rates down. So Fed rates and mortgage rates often move at roughly the same time, but are both in response to changes in the stock market. One does not cause the other. According the Mortgage Goddess, the Fed’s changing the interest rate affects short term financing. Mortgages are long term loans and so aren’t directly affected by a change. However, mortgages are driven by changes to the economy. What often happens is that the Fed lowers rates in response to unrest in stock markets. At the same time, unrest in equities often fuels a “flight to quality” or people investing in Treasury securities. When more people invest in these bonds, it drives interest rates down. So Fed rates and mortgage rates often move at roughly the same time, but are both in response to changes in the stock market. One does not cause the other.

]]> http://www.loanbiz.com/blog/2007/12/27/separating-what-matters-from-whats-hype/#comment-14 Ksenia Fri, 18 Jan 2008 12:44:05 +0000 http://www.loanbiz.com/blog/2007/12/27/separating-what-matters-from-whats-hype/#comment-14 This is great. I think that so many consumers assume that if the Fed lowers the interest rate that it will have a direct impact on their mortgage. The fact that there is no direct correlation between Fed's rates and mortgage rates is very useful to know. As consumers shop for mortgages post Fed announcements, they may not see the decrease in rates that they were expecting and assume that the lending company that they are talking is trying to take advantage of them. This may help to resolve this situation and provide better information for the average consumer (like me). This is great. I think that so many consumers assume that if the Fed lowers the interest rate that it will have a direct impact on their mortgage. The fact that there is no direct correlation between Fed’s rates and mortgage rates is very useful to know. As consumers shop for mortgages post Fed announcements, they may not see the decrease in rates that they were expecting and assume that the lending company that they are talking is trying to take advantage of them. This may help to resolve this situation and provide better information for the average consumer (like me).

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