Federal Funds Rate

It was a busy week for economists, policymakers, consumers and mortgage professionals.
We had a surprise .75% rate cut from the Fed.
We had the announcement of an economic stimulus package that included not only significant tax rebates, but a temporary increase in the conforming loan limits from $417,000 to $729,750 (a huge, huge win for Californians).
We [...]

It’s amazing how quickly fear of inflation can be replaced by fear of recession.
In a surprise move, the FOMC lowered the Federal Funds Rate by .75%. That this happened before the FOMC’s regularly scheduled end-of-January meeting, combined with the size of the cut and the willingness to aggressively cut further, indicates how precarious the Fed [...]

Yesterday Ben Bernanke and crew lowered the target Federal Funds rate by .50%.
While this was reported as a surprise by many, futures trading prior to the cut indicated a 100% certainty of at least a .25% cut and the effective Federal Funds rate had been waffling around a .25% cut for nearly six weeks.
Neither futures [...]

Below, I summarize what happens to mortgage rates following the start of a Fed easing cycle. An easing cycle is when the Federal Reserve begins a pattern of lowering it’s target Federal Funds Rate.
The source for mortgage rates is Freddie Mac’s Monthly Primary Mortgage Market Survey for 30-Year Fixed-Rate Mortgages. I am ignoring mortgage points, [...]

So many people have been interested in how the target Federal Funds Rate affects mortgage rates that I decided to make a graph. The graph is easy. Interpreting it is hard.
Just so we’re on the same page, the Federal Reserve sets the target Federal Funds Rate, which is the rate banks charge each other for [...]