What or who controls mortgage rates?
The Federal Reserve controls Discount Rates not Mortgage Rates and the two rates are not connected. In simple terms - The Fed. (Federal Reserve) does not directly control mortgage rates, but the market does. Mortgage rates (long term) are based on the supply of money and the demand for that money and the 10-year Treasury Bond yield.
If people are placing money in savings or are buying 10 and 30 year Treasury Bonds (as an investment), then the supply of money, available for lending, is increased. If people are buying stuff and not saving or investing then the supply of money goes down. When the supply of money goes down, banks raise rates as a method of attracting people to invest or save their hard earned dollars instead of using them to buy stuff. The other side of this equation is the demand for the money. The more people who are buying homes, the greater the demands for money and the higher the interest rates go ---- usually.
See related Item: http://
Go
back
|