Mortgage Rates vs. The Fed: Explained Like You’re in 8th Grade!

🎓 Mortgage Rates vs. The Fed: Explained Like You’re in 8th Grade! 🏡

Ever wonder why mortgage rates don’t always drop when the Fed cuts rates? Let’s break it down:

1️⃣ The Fed’s Job and Its Rate
The Fed sets a “wholesale” rate for banks when they borrow money overnight. This impacts short-term stuff like credit cards. Mortgage rates? They’re more like a “long-term” deal and follow different rules.

2️⃣ What Really Affects Mortgage Rates
Mortgage rates are like house prices—they depend on what’s happening in the economy:

• Inflation (prices rising) 🛍️
• Jobs (how many people are working) 💼
• Economic growth 📈

3️⃣ Why Mortgage Rates Don’t Always Drop
When the Fed lowers its rate, people expect mortgage rates to drop. But investors set mortgage rates based on what they think will happen in the future. If inflation or economic struggles are still a concern, mortgage rates might not budge.

4️⃣ Timing is Key
Sometimes, mortgage rates move before the Fed does. It’s like hearing a new video game will go on sale—stores might lower prices early, so by the time the sale hits, there’s not much change left.

💡 The Big Idea
The Fed’s rate and mortgage rates are like distant cousins—they’re connected but don’t always move together. Mortgage rates follow the bigger economic picture, and they might take a different path.