| When the Federal Reserve lowers the Fed rate, it is lowering the short-term rate only. Mortgage rates are long-term rates so they are not directly affected.
The path to lower mortgage rates is tied to inflation. Most mortgages are sold to Fannie Mae and Freddie Mac. They get the money to buy mortgages by selling bonds to investors from around the world. Interest rates on the mortgages have to be good enough to entice the investors to buy the bonds.
Investors want a better return for their money than the future inflation rate. So the mortgage rates have to be higher than the rate of inflation to make investors want to buy bonds.
The Fed lowers its rate to stimulate buying. Buying can raise inflation. If the investors feel that inflation is on the rise, they will not invest in the Fannie and Freddie bonds unless the mortgage rate is higher than inflation. Thus mortgage rates will rise. If the economy slows and inflation is low, then the mortgage rates will fall. |