Yesterday's policy announcement from the Federal Reserve had a chance to cause significant volatility for the bond market and the bond market is the chief ingredient in the mortgage rate equation. But this time around, the Fed didn't cause a measurable reaction in the mortgage market.
I'm frequently asked whether mortgage rates are 0% since the Fed just kept rates at 0%. People hear a headline on the news or a radio soundbyte mentioning the words "Fed, rate, zero," and then assume the Fed just made some change that dropped rates to zero percent. After all why would there be so many news headlines about it if the Fed merely kept its policy rate unchanged?!
It's a fair question in that sense, but understand that the Fed's rate decision will always make the news, even if the rate is the same as it has been since March (and it is). As such, if mortgage rates weren't 0% for the past 6 months, they wouldn't be zero now. And in fact, they'll never be zero simply because the Fed Funds Rate is zero. These are two entirely different rates that apply to vastly different amounts of time and types of transactions....(read more)