Mortgage Rates Drop After Fed “Raises Rates”

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Posted To: Mortgage Rate Watch

Mortgage rates fell today even though the Fed “raised rates.” What’s up with that? There are all kinds of rates. Some are fixed. Some are adjustable. Some apply to longer-term debt (like mortgages) while others govern very short time frames (like overnight!). Short and long term rates can affect one another, but they don’t always move in the same direction or by the same amount. The rate the Fed adjusts (aptly named, the Fed Funds Rate), governs only the shortest-time frames (generally overnight loans among big banks). That means mortgage rates don’t have to follow the Fed Funds Rate, even though Fed policy has a profound effect on overall interest rate volatility. The reason that mortgage rates fell after the Fed rate hike is even easier to understand. It has to do with how traders account…(read more)

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