Fed cuts rates but mortgage rates are higher
Most people think that when the Fed cuts interest rates, mortgage rates will go down as well but as we've pointed out before, the Fed funds rate are short term interest rates while mortgage rates are based on long term interest rates. Thus, since long term interest rates on both mortgage backed securities (MBS) and 10 year US Treasury Bonds are higher since the Fed rate cuts, mortgage rates are correspondingly higher.
From Michelle Donley at MarketWatch:
"U.S. fixed-rate mortgages rose for the first time in five weeks, according to Freddie Mac's survey released Thursday. The national average interest rate on the benchmark 30-year, fixed-rate loan averaged 5.68% in the week ending Thursday, up from 5.48% a week ago, but down from 6.34% a year ago. The 15-year fixed-rate loan averaged 5.17%, up from 4.95% a week ago, but down from 6.06% a year ago. The five-year Treasury-indexed hybrid adjustable-rate mortgage averaged 5.32%, compared with 5.13% a week ago and 6.04% a year ago. "Mortgage rates ended their five-week descent this week, with average rates on 30-year and 15-year fixed rate mortgages coming up by about 0.2 percentage points," said Frank Nothaft, Freddie Mac vice president and chief economist. "This increase completely erased the previous week's decline. The movement in fixed mortgage rates was broadly consistent with the movements of Treasury bonds over the week."