How mortgage rates and Federal Reserve work in tandem!
How mortgage rates and Federal Reserve work in tandem!
Any economy needs a supervisory body that can act like a watchdog. In the US the federal reserve acts like that supervisory body that keeps on evaluating the US economy and intervenes to address the inflationary concerns as well as avoid the occurrence of the economic recession or depressions. The policies and the actions of the federal reserve are further elucidated by the mass media by providing the opinions as well as the interpretations on them. The common in turn finds it difficult to comprehend the real impact of such actions on the interest rates in general as well as mortgages in particular. Although the actions of the federal reserves can have a direct impact on the prime rate, the mortgage interest rates are more than ever dictated by the trading of the mortgage backed securities that are similar to the bonds and trade on a daily basis. This really indicates that the interest rate movement is more than ever influenced by the competitive relationship between stocks and bonds. It is a known fact that the stocks, bonds as well as the mortgage securities, they all compete for the same investment dollars. When the federal reserve feels that there is a need to reduce the interest rates in order to stimulate the economy, the reduction can cause the stock markets to rally. By the time the market becomes bullish, the money to invest in stocks comes from the selling off of other investments like the mortgage-backed securities. In the past in many instances the federal reserve has made efforts to increase the interest rates, that instigated fears that the corporate profit margins would be affected. This resulted in stocks being sold off, leading the money-managers to look out for a place to invest in the next market rally. They do this by investing in the mortgage backed securities, that results in the dropping of the mortgage rates. If you are looking for a Lowest Seattle Mortgage Rates or Seattle home loan rates then it is best that you take the advice of a professional mortgage consultant.