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
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Real Estate Advisor