Rodkin on Taking Advantage of Low Interest Rates

Readers ask questions, and our real estate expert answers. This week, a reader named Jenny from the Lake View asks if she should cave in to the advice of real estate agents and lock in a low interest rate now, or continue to take her time searching for the home she wants.

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2 years ago
Posted by joecloans

This was a very misleading video. It is full of numerous innacuracies. 30 year mortgage rates are not tied to Fed Fund rates at all. They are tied to the MBS market (mortgage backed securities). There is also a general correlation with 10 year treasuries. But in no way tied to fed funds. In addition, rates move quickly and without notice. Mortgage rates, like stock move on economic indicators and it can happen in a minute.

2 years ago
Posted by EileenChicago

JOECLOANS - I came down to make this exact same comment and noticed you'd already said it. Mortgage rates are definitely NOT tied to the Fed Funds rate. There are some correlations, yes, but they are in no way tied to the Fed Funds rate. The FF rate is the rate at which banks loan money to eachother overnight at the federal reserve.

If mortgage rates WERE tied to the FF rate, how can you explain daily fluctuations in mortgage rates, when the FF rate only can change after a FOMC meeting where they decide to change it?

2 years ago
Posted by Dennis Rodkin

Eileen, Joe: Forgive me. I was out of town when your comments posted, so I didn't see them at the time. They've just been pointed out to me.

Of course you're right. What I should have said was that movements in mortgage rates are associated with what the Federal Reserve does. I meant "tied to" in a looser way than it comes off. I misspoke, and I apologize.

I wrote about the common misperception that mortgage rates are directly connected to the Fed a few years ago. Here's that item:

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