Mortgage rates after the Federal Reserve rate cut

I will publish a report on Saturday when markets have – I hope – settled down somewhat after the gyrations of recent days (which seem like weeks) and the cut in the Federal Reserve Funds rate  – the rate at which banks and other depository institutions lend money to each other, usually on an overnight basis – announced on Tuesday.

The Fed Funds rate translates directly into the interest rate charged for credit cards, auto loans, etc. but not for the traditional 30-year fixed rate mortgage (FRM) which usually is based upon the yield on the US Treasury 10-year Note (10T). But as I will explain on Saturday, although the spread – the amount investors want above the yield they can obtain on 10T – has been very consistent around 1.7% in recent years, in times of stress the spread can vary widely. In 2008, for example, it reached 3.1%.

For an article explaining the relationship between FRM, 10T and the Fed Funds rate read Mortgage rates explained and Coronavirus and the Housing Market: Part 2.

Andrew Oliver
Market Analyst | Team Harborside | teamharborside.com
REALTOR®

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