Does the Federal Funds Rate Affect Interest Rates?

Dave Marzinke joined me recently to break down the latest mortgage news.

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I’m back again with Dave Marzinke from Movement Mortgage to talk about what’s going on right now in the mortgage industry.

A few weeks back, the Federal Reserve announced that they were going to keep the federal funds rate at 0% through 2023. Most buyers hear that and think it will keep rates down for another two years, but that might not be the case.

The truth is that mortgage-backed securities are a completely different instrument than the federal funds rate. The federal funds rate can be set by the Federal Reserve and they can change it whenever they want.

Mortgage rates themselves are affected by mortgage bonds, which are affected by inflation. When we start to see signs of inflation, that can push rates back up even if the federal funds rate is zero.

      Mortgage-bonds affect rates more than anything else.

 

If you have a decent credit score, good income, and a solid debt-to-income ratio, you’re looking at an interest rate of 2.75% to 3% for a conventional mortgage if you were to buy a home right now. It makes a ton of sense to buy and lock in that rate for a 15- or 30-year term.

If you have any questions for Dave about interest rates or anything else related to mortgages, give him a call at (949) 449-2477. If you have any other real estate-related questions for me, don’t hesitate to reach out via phone or email. I look forward to hearing from you soon.