Federal Reserve increase rates; Mortgage Rates drop

Too often I see a headline like this one: “Mortgage Rates Continue to Slide Despite Fed Hike.” The 30-year Fixed Rate Mortgage (FRM) does NOT follow the Federal Reserve’s rate increases!

Look at this chart for the last few months:

Note the correlation between the 10T (red line) and FRM (green) – and the lack of correlation between FFR (blue) and FRM.

Let’s look at this another way, the spread (difference) between the FRM and 10T, and between FRM and FFR:

Over the last 6 months, the spread between FRM and 10T has been in a tight band between 2.69% and 3.04%, while that between FRM and FFR has dropped from 3.04% to 1.42%.

For a more detailed explanation of what drives mortgage rates – and why the FRM will fall at some point – read Why Mortgage Rates Will Fall

And read these articles:
What drives Mortgage Rates in one chart
Lies, Damned Lies and Inflation “Statistics”*
Why Mortgage rates Will Fall

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  • Andrew Oliver, M.B.E., M.B.A.
    Real Estate Advisor

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