Mortgage rates still low

It’s commonly thought that mortgage rates follow what we all call the “Fed rate.” But actually that’s not entirely true. The interest rates the Fed sets are the rates controlling the rate at which banks lend money to one another and the commercial lending rate.

That said, in more positive markets interest rates and mortgage rates tend to be higher. But there are other ways in which the Fed can influence mortgage rates. The federal government invests in many different things, including securities that are backed by mortgages. Kevin Hoover at VanDyk Mortgage tells me the federal government (for now) plans on purchasing these securities at the same level at which they currently invest in them. This is a good thing in terms of mortgage rates remaining low. When the Fed invests a lot in them, they are “good” investments and mortgage rates remain low. If and when the Fed invests less in them (or stops investing in them altogether), they become less desirable investments and mortgage rates go up.

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