Mortgage Lenders In New Jersey Are Not Lowering Interest Rates, Why?

Understanding Mortgage Interest Rates.

The Federal Reserve lowered interest rates on Friday August 17,2007 so why are we not seeing lower mortgage interest rates?

 

There can be a lot of confusion about what the Federal Reserve does and how it affects mortgage interest rates offered by your local lender. On Friday the Federal Reserve lowered the Discount Rate by .50% to 5.75% from 6.25%. This rate is generally 1% higher than the Fed Funds rate, which is still at 5.25%.

 

The Fed Funds rate is the interest rate charged by banks when lending to each other money. The Fed Discount rate is the interest rates the Federal Reserve charges to lend money to banks and lending institutions as an emergency lender.

 

Mortgage interest rates that lending institutions charge for prime mortgages is normally calculated by adding a certain percentage to the Fed Funds rate. Cutting the Discount rate does not really affect Mortgage interest rates, but it does help to stabilize some of the Mortgage lenders who have been under extreme pressure over the last few months.

 

When you see the Federal Reserve adjust the Fed Funds rate, watch for Mortgage interest rates to move to a new level very quickly.

James Boyer

Realtor Associate

Keller Williams Real Estate

488 Springfield Ave.

Summit, NJ 07901

Proudly Specializing in the following communities Real Estate markets, Morristown NJ, Madison NJ, Chatham NJ, Summit NJ, and surrounding communities.