There is no direct correlation between the Fed funds rate and mortgage rates. Not quite like that, at least.
Right now, first mortgage rates have already priced in a 100% expectation that the Fed will drop rates in October.
If the Fed doesn’t, rates will spike. If the Fed does lower the rates, first mortgage rates might go up anyway (this happens more often that not, actually). Usually, it’s just as important what the Fed says, like if they’re leaning towards going up or down, than what they actually do that particular time.
2nd mortgage rates and lines of credit will typically drop right away, since the prime rate will change right away, though if you’re in an existing line of credit, it might not change for you until the next billing month.
2 Responses to If the Fed lowers it’s rate, how long does it generally take to affect mortgage rates? Days, weeks, months?
mazziatplay
June 2nd, 2010 at 12:48 am
The Fed rate is not directly connected to mortgage rates. They are driven by the bond market which reacts to the overall economic picture.
Yanswersmonitorsarenazis
June 2nd, 2010 at 1:19 am
There is no direct correlation between the Fed funds rate and mortgage rates. Not quite like that, at least.
Right now, first mortgage rates have already priced in a 100% expectation that the Fed will drop rates in October.
If the Fed doesn’t, rates will spike. If the Fed does lower the rates, first mortgage rates might go up anyway (this happens more often that not, actually). Usually, it’s just as important what the Fed says, like if they’re leaning towards going up or down, than what they actually do that particular time.
2nd mortgage rates and lines of credit will typically drop right away, since the prime rate will change right away, though if you’re in an existing line of credit, it might not change for you until the next billing month.