August 19th, 2022 10:41 AM by Joe Minotto
When the Fed raises interest rates, mortgage rates are likely to follow – right? Well, not exactly. In the wake of the Fed increasing its benchmark rate by 75 basis points, the average 30-year fixed mortgage rate fell.
Over the course of three days in late July, mortgage rates dropped from 5.54% to 5.22% and then again to 5.13%. Why did this happen? The determination of mortgage rates is based on several factors.
In addition to Fed rate changes, rates are also affected by jobless claims and unemployment, inflation, and supply and demand. In fact, mortgage rates are more closely tied to treasury yields and mortgage-backed securities than to the federal funds rate. The ongoing uncertainty about the economy has caused a decrease in new loan and refinance applications. To combat this lack of demand, lenders slightly reduced rates.
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