How does bond interest rate impact Mortgage interested rate?

Business & Finance
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What are the relationship between Fed reserve rate and Mortgage rate, and bond rate?

Jul 7th, 2015

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The Federal Reserve is the only government agency commissioned by Congress to act as the central bank of the nation and oversee the long-term performance of the economy. The Fed, as the Federal Reserve is informally called, influences the economy through financial actions called policy levers. Among the most important levers of monetary policy is setting the federal funds rate, which has derivative effects on mortgage rates.

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Jul 7th, 2015

My question is also asked about relationship of Bond rate, Fed rate, and Mortgage rate..  you answer is only partial answer and ir does not mention Bond rate

Jul 7th, 2015

ok let me answer the whole question


Jul 7th, 2015

Mortgage rates are dictated mostly by market movements, but the Fed can have a huge influence on rates.

Even though the federal funds rate is not tied to mortgage rates, it affects them indirectly because it impacts lenders' borrowing costs.

"If it is more expensive for banks to borrow, they will pass that expense on to their customers," says Brett Sinnott, director of secondary marketing at CMG Mortgage Group in San Ramon, Calif. "In the current environment, any change will have a direct, instant and negative impact on rates."

The Fed also uses monetary stimulus programs, such as bond purchases, to help keep mortgage rates where it wants them.

When the Fed buys mortgage bonds and U.S. Treasuries, it increases demand for these investments. Such purchases tend to keep mortgage rates down. In the other direction, The Fed can decrease demand by selling bonds, which could send mortgage rates up.

The Fed's economic projections also influence mortgage rates, as they affect investors' sentiments. A gloomy economic outlook usually means lower mortgage rates. Signs of a stronger economy often result in higher mortgage rates.




Jul 7th, 2015

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