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Article: Why haven't Fed cuts caused mortgage rates to drop?

Article from:
The Beacon News - Aurora (IL)
Article date:
June 10, 2001
Copyright

Q. I'm looking to buy a home and want to get a good mortgage rate. The Federal Reserve has cut its interest rates five times this year and I expected mortgage rates to come down as well, but they haven't. Why not?

A. While the Federal Reserve manages short-term interest rates, it actually has no direct control over long-term rates set by the bond market.

Many homebuyers expect long-term mortgages to rise and fall with short-term interest rates, but they don't always.

"The connection between what the Fed does and mortgage rates is often quite loose," said Robert Van Order, chief economist for the Federal Home Loan Mortgage Co., better known as Freddie Mac.

"There is a long-run tendency ...

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