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Over the years I have received numerous calls regarding the correlation (or lack thereof) between the Federal Funds versus the mortgage interest rates.

I'm sure, on at least one occasion, you have heard the news when the Feds reduce or increase the interest rates.  The rate in question is the Federal Funds rate, which does not necessarily affect mortgage rates.

The mortgage rates are tied very closely to the yield on the 10-year Treasury Notes: the higher the yield, the higher the mortgage rates and, conversely, the lower the yield, the lower the mortgage rates tend to be.

As a general rule of thumb, Banks and Lenders usually place their fixed mortgage rates about two percent (2%) higher than the yields on the 10-year Treasury Notes.  The yield on the Notes tends to be tied to economic data (unemployment rates and the consumer confidence index for example). Historically speaking, the weaker the economy, the lower the yield on the Treasury Notes.  So, in other words, the worse off the economy is doing, the better (or lower) the mortgage rates tend to be.

In summary, when trying to "get a feel" for what mortgage rates are doing, look at our economy and look at the yield on the 10-year Treasury Notes.  Or, better yet, call us!  We receive rate sheets daily from many Banks and Lenders we work with and we would be happy to answer any questions you might have!