How Fed Action Really Affects Mortgage Rates

Performance Property Real Estate Question

Q: How does what the Fed does affect mortgage interest rates? Carl, Edison, NJ

A: The Fed doesn’t set mortgage rates directly. The Fed sets the federal funds rate, which impacts short-term and variable interest rates. Other factors affect mortgage rates like price inflation as well as supply and demand–lenders for example may decrease interest rates to attract more business. The Fed’s monetary policy can increase or decrease interest rates which affect mortgage rates but only indirectly.

Thanks for your question, Carl.

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