Yesterday, we had two borrowers who wanted to hold off on locking pending the Fed’s Announcement in regard to overnight rates. The Fed did announce that “overnight rates” would remain unchanged, but the market yawned. Our point is that the Fed’s announcements regarding overnight/short term rates often have no affect on mortgage rates.
We have seen many instances over the years when the Fed has LOWERED short term rates, but long term mortgage spiked upward in response. This occurs when Fed Announcements (of lower rates) spark inflation fears which send up long term rates.
Today, rates improved solely b/c of an apparently weak economic outlook, not b/c of anything the Fed said or did. Hence, don’t expect the Fed’s comments or actions regarding short term rates to move the market in expected ways. If “Jobless Claims” had been surprisingly low today, rates would have likely sky-rocketed despite the Fed’s announcement yesterday.
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