My neighbor stopped me in the hall the other day and asked, “if the Prime Rate drops, will mortgage rates fall as well?” The short answer is, “not necessarily.”
As you can see above, the Prime Rate is typically 3% above and closely tracks the Fed Funds Rate. 30-year fixed rate mortgages do not closely track the short term Prime Rate or Fed Funds Rate. Instead, they typically follow 10-year maturity Treasury rates.
30-year fixed mortgage rates are sensitive to inflation and economic news. Good economic news usually causes mortgage rates to rise and bad economic news causes them to fall.
If you need a referral to a great mortgage lender, please contact Michael Zimmerman.
