Fed Rate Increase Won't Affect Mortgage Rate Much...????? (1%, mortgage rates, mortgages)

[Quaker15]

From what I've read, Fed rate increase won't affect mortgage rate much in the near future (less than one year). Is that true? Let's say, Fed increase rate by 0.25% in October, let's say the current average mortgage rate is 4.0%, how much do you expect mortgage rate to increase in November?

[Electrician4you]

It would start impacting some at about 5%

[cargoman]

Since I just bought a house and am locked in at 4.25% for the next 30 years....I would say my personal impact equates to....." I do not give a crap"

[mathjak107]

investors , not the fed's short term rate moves determine interest rates . most of the time when the fed has raised interest rates by 1% or more in a year , bond rates actually went down since with higher short term rates inflation expectations are less and mortgages track bond rates .

[mathjak107]

Originally Posted by cargoman

Since I just bought a house and am locked in at 4.25% for the next 30 years....I would say my personal impact equates to....." I do not give a crap"

well yes and no .

higher longer term rates mean higher inflation expectations .

higher inflation means everything about your house will cost more and the mortgage 30 years from now may be the smallest cost .

when we all bought houses in the 1970's they were 35k . the mortgage was a lot of money in those days and was far more than our rent at 275 bucks a month .


well today those houses are paid off and real estate taxes are 12-18k on those homes and 450 a month for heat and utility's .

the 275 buck mortgage is chump change in the scheme of things because of inflation and even having the house paid off saves very little in the end . that mortgage money now barely covers cable tv and a dinner out.


so yep , you better care where rates go , because rates and inflation track each other .

[ncole1]

Fixed mortgage = money borrowed for a long time

Overnight loans between banks = money borrowed for a short time

Fixed-rate mortgage rates are actually more related to the yield of 10- and 20-year Treasury bonds than they are to short-term loan rates such as the Federal funds rate (which is what the Fed tries to control directly).

Google "yield curve".

[mathjak107]

you can see here since 1980 in every year the fed raised short term rates more than 1% , longer term rates fell and bonds did well except 1994 .

the 2nd column is how much rates went up up , the third was the gain longer term bonds saw .