Mortgage rates and the Fed discount rate

Home Mortgage rates are driven to a large extent by supply and demand. The more demand for Mortgages the higher the rate.

Recent actions by the Fed to stimulate economic growth by lowering the Discount Rate have helped to improve Wall Street's confidence in the economy which in turn tends to increase Mortgage rates. In times of strong economic growth the Fed may increase rates to curb inflation which would tend to lower Mortgage rates.

During this last week Mortgage rates dropped and then rebounded as demand for Mortgages increased. Folks were trying to take advantage of the lower rates to refinance their higher interest rate Mortgages thus increasing demand for mortgages and increases in Mortgage rates.

A more accurate gauge of where Mortgage rates may be going is 30 Year Treasury bonds. These bonds are driven more by Wall Street movement and less on the Fed's Discount Rate.

Confusing? Check with your Mortgage consultant for more information on impact to you specifically.