What gives with mortgages. The 30 year fixed mortgage is at about 6.5%. The fed discount rate is 5.25% Back when the fed lowered the discount rate to 1.0% the 30 year fixed was at 5.5%. There isn't a lot of margin between the 5.25% fed discount rate and the 30 year 6.5% rate. What gives how are mortgage staying so low?? Shouldn't we be at a 8.5% rate for a 30 year fixed.
They are desperate to lend money to someone, but NOW it needs to be someone that can pay it back, too, so they are even more desperate. If they don't lend it to anyone, they can't make ANY interest. So they try to lend a lot to make up for the spread.
30-year fixed mortgages price off of the 10 year treasury yield not the fed funds rate. 10 year yield has only risen from abount 3.80% to 4.60% since fed funds were 1%. adjustable rate mortgage rates have risen much more as they are priced off of 1-12 month treasury rates. You could of gotten a mortgage at under 4% at the low and now this is closer to 5.75 also.
but shouldn't mortgage rates adjust to fed discount rate. I mean almost everything adjusts to the fed. Right
I'll say it again. 30year mortgage rates track long term gvt rates such as 10 year bond yield. 10 year bond yields havn't been that volatile so there hasn't been much volatility in 30 year fixed mortgage rates. Only ARM mortgages track what the fed does. ARM rates have moved way up as fed went from 1% to 5.25%. Hope you get it.