Question

How does the Federal Reserve affect mortgage rates? Will mortgage rates be affected over the next...

  1. How does the Federal Reserve affect mortgage rates? Will mortgage rates be affected over the next year? Why?

Homework Answers

Answer #1

Federal reserves can control the fed rate . When Fed buys securities from the market the cash will be released into the economy this reduces the reserves in the banking systems and the fed funds rate decreases. When Fed sells security cash will be bought from the economy, the fed rate will increase and reserves in the banking system will increase.
This rate affect mortgage rates in the long run . As fed changes rates the banks also change their rate which affect the mortgage rates. They can also be affected by quantitative. With quantitative liquidity in banks increase and hence mortgage rates fall.

Yes mortgage rate will be affected over the next year.Since mortgage loans are long term rate and the rate of treasury bonds are for 10 and 20 years. The affect of change in discount and fed rates will affect for long time.

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