If the FED Target Rate is 2.25% How Come I Can't Get a 30-Year Fixed Mortgage For Less Than 5.8%?
Tue, 04/15/2008 - 17:47 — reexpert
Are the banks really this greedy? This seems like a complete bailout of the banks at the expense of those of us who have to work and earn a salary based in dollars. Does anyone know how the prime rate is normally determined?
It is pretty ridiculous. Even credit cards the offer the prime rate forever on their cards if you qualify and that's 5%. Why should my credit card rate be less than my mortgage? It shouldn't. They need to bring down the mortgage rates, I think the lenders feel that "cheap is cheap" so we won't notice that their rates are still 4 points above the amount they're paying to the fed.
I'm a TV reporter in Westchester/Manhattan doing a news story about real estate. If you live in the Westchester/Manhattan area and you're having trouble getting a mortgage (or you had problems during the process), please call or email me, I'd like to interview you. Call 914-417-2726 or email kyueh@rnntv.com Thanks. P.S. I'm always looking for stories about how regular, working people are struggling in the current economy, please feel free to drop me a line.
The pricing difference isn't greed, it's fear. The banks are that scared, the fed is trying to lure them into lowering rates, but the spread in the rates represents the perceived risk. In this case 3.55% of the loan value plus the profit which usually hovers around 1%. The banks are betting a lot of these loans are going to fail.
You can see a few decades of average 30 year mortgage data at http://research.stlouisfed.org/fred2/fredgraph?s[1][id]=MORTG
and the fed funds rate at http://research.stlouisfed.org/fred2/series/FEDFUNDS (you can put them on the same graph, but I couldn't get a link to that).
In general, mortgage rates qualitatively follow the fed funds rate, but there is always a premium for risk and for profit. As near as I can tell, the average rate never goes below about 5, regardless of how low funds rate goes.
rates have been on the rise for the last few weeks because there was so much talk of inflation, but as of yesterday there was no more talk of inflation and the economy is actually predicted to go into more of a recession. so within these next few weeks or months, interest rates will be going down.
Mortgage rates do not follow the federal funds rate. They follow the bond market. The bond market nearly always has an inverse reaction to the lowering of the federal funds rate. Right now the reason mortgage rates aren't lower is because of high oil prices causing inflationary fears.
It is pretty ridiculous.
It is pretty ridiculous. Even credit cards the offer the prime rate forever on their cards if you qualify and that's 5%. Why should my credit card rate be less than my mortgage? It shouldn't. They need to bring down the mortgage rates, I think the lenders feel that "cheap is cheap" so we won't notice that their rates are still 4 points above the amount they're paying to the fed.
http://www.creditcardforum.com - credit card forum for consumers
mortgage opportunity
I'm a TV reporter in Westchester/Manhattan doing a news story about real estate. If you live in the Westchester/Manhattan area and you're having trouble getting a mortgage (or you had problems during the process), please call or email me, I'd like to interview you. Call 914-417-2726 or email kyueh@rnntv.com Thanks. P.S. I'm always looking for stories about how regular, working people are struggling in the current economy, please feel free to drop me a line.
Not Greed-- Fear
The pricing difference isn't greed, it's fear. The banks are that scared, the fed is trying to lure them into lowering rates, but the spread in the rates represents the perceived risk. In this case 3.55% of the loan value plus the profit which usually hovers around 1%. The banks are betting a lot of these loans are going to fail.
Interest rate history
You can see a few decades of average 30 year mortgage data at http://research.stlouisfed.org/fred2/fredgraph?s[1][id]=MORTG
and the fed funds rate at http://research.stlouisfed.org/fred2/series/FEDFUNDS (you can put them on the same graph, but I couldn't get a link to that).
In general, mortgage rates qualitatively follow the fed funds rate, but there is always a premium for risk and for profit. As near as I can tell, the average rate never goes below about 5, regardless of how low funds rate goes.
RATES ABOUT TO LOWER
rates have been on the rise for the last few weeks because there was so much talk of inflation, but as of yesterday there was no more talk of inflation and the economy is actually predicted to go into more of a recession. so within these next few weeks or months, interest rates will be going down.
for more information or a free no obligation consultation call 858-504-0055
securityonefinancial@gmail.com
http://www.securityonefinancial.com
Mortgage rates do not follow
Mortgage rates do not follow the federal funds rate. They follow the bond market. The bond market nearly always has an inverse reaction to the lowering of the federal funds rate. Right now the reason mortgage rates aren't lower is because of high oil prices causing inflationary fears.