What to Know: The Fed Funds Rate vs. Mortgage Rate
The overall economy and actions by the Federal Reserve have an indirect impact on mortgage interest rates. This explanation below from themortgagereports.com is helpful:
The federal funds rate or “fed funds rate” is what banks charge to lend money to one another overnight, and it ultimately affects consumer borrowing, too. The fed funds rate plus 3% generally equals the “prime rate” — which is the basis for setting rates on consumer credit lines like auto loans, credit cards, and home equity loans. “Not all interest rates are in lock-step with the fed funds rate (mortgage rates are not, for example), but they are all influenced by it.”
Mortgage interest rates are determined by many variables and are very difficult to forecast, especially with unprecedented events such as the Coronavirus. What is clear is that mortgage interest rates are extremely low and will likely stay low throughout the year. If you or your friends have any questions that we can answer, please don’t hesitate to call your local Advantage Lending Loan Officer.