Econ 101? Mortgages

[Boomer]

OK. I admit it. I don't get it.

The Fed cuts the rate. The banks like it.

CD rates dropped immediately.

But mortgage rates seem to be creeping up. I thought they would drop, too. Silly me.

I think it has to do with who is tied to what. - prime rate? -treasuries? - profit margins?

If mortgage rates go up, won't those houses languishing on the market have to lower the prices more?

It may be that the fixed rate mortgages creep up by a relatively small amount and the deal on the house already makes it a lot better than a wash. But still, there is the psychology of the market to consider.

What can a sensible borrower looking for a fixed rate mortgage expect to find in the wake of these rate cuts?

I feel like I am looking at one of those "What's wrong with this picture?" things.

I must be missing something.

I hope that someone will educate me on this one. -Econ 101 Style. :dontknow:

[JohnN]

Fed rates and CD's are short term interest rates , Fed can manipulate.

Mortgages are long term rates - market based on many more variables than just the Fed.

I'll let someone brighter give a better explanation.

[Boomer]

Thanks JohnN,

Long term vs. short term rates - that makes sense.

No time was lost on hammering CD rates. It was an instant hit.

No wonder I could not see the advantage to the little guy trying to get a sensible mortgage. There really isn't going to be one.

I get it. I don't like it. But I get it. :(