Bargain Hunting and Low Interest
- Thread starter Turfman
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PitbullMidwest
Platinum Member
<font color=blue>The 2% rate that you mention is the FOMC fed funds rate</font color=blue>
The FOMC is often called the "over night" rate. Before a bank can close its books for the day they have to have X amount of cash in reserve, if they are short on funds they take out an over night loan from the Federal Reserve to cover their reserve shortfall.
One reason mortgage rates aren't falling as fast as the goverment rates, is that banks have a lot of money to loan and lots of people wanting it. They don't have to compete for your business so why loose money buy cutting rates?
The FOMC is often called the "over night" rate. Before a bank can close its books for the day they have to have X amount of cash in reserve, if they are short on funds they take out an over night loan from the Federal Reserve to cover their reserve shortfall.
One reason mortgage rates aren't falling as fast as the goverment rates, is that banks have a lot of money to loan and lots of people wanting it. They don't have to compete for your business so why loose money buy cutting rates?
Jeff396
Veteran Member
Gee, I would think that if that's the case why the bank rates aren't falling that the Feds would bring pressure on them to follow suit. I mean isn't that why the Fed is cutting rates so we will spend more money to get this economy going? Of course I guess as usual, nothing REALLY makes sense...
Jeff
Jeff
rf33
Gold Member
I think that the largest reason that the mortgage rates have not come down is that the overnight rate changes, and nobody believes that this rate will stay at 2 % for the next 15 to 30 years, the usual term for mortgages. The mortgage rate will generally track better with the 10 year or the 30 year bond yield than it will with the fed funds rate.
rf33
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rf33
