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4 Things to know about the Federal Reserve

1. The Fed* does not control the mortgage rates. 

 

2. Rates fell before the recent Fed rate cut. 

Investors regularly speculate and place their bets in anticipation of Fed action. This will move markets in advance.

 

3. The Fed sets the Fed Funds and discount rates.  

These are costs for overnight loans from bank to bank or from Fed to member banks.

 

4.  When the Fed cuts their rates, mortgage rates can actually rise.

Lower Fed rates can be good for stocks, so investors often sell mortgage bonds to raise cash for stock investments. When bond prices fall, mortgage rates rise.

 

 

****The Fed* refers to the Federal Open Market Committee, the monetary policy making body of the Federal Reserve System.