6/07/2004

Rate Increase in Your Future

So with the chatter of a "jobless recovery" diminishing to a whisper...what happens next? Any doubts of the Fed making an increase to short term interest rates have vanished, and it certainly appears inevitable that a .25 to .50% hike will be delivered at the next FOMC meeting scheduled for June 30th. Remember that there are many different types of interest rates, and the Fed manipulates the Federal Funds Rate, an overnight lending rate between banks, not interest rates for mortgages. Many people - including some of the national media - believe that when the Fed "raises rates", there is a direct correlation to rates on first mortgages. Not true. In fact, when the Fed finally does give the Fed Funds Rate a hike, it should ease the inflationary market pressures and surprisingly give Bonds a boost, which would reduce rates on mortgages. -- The Mortgage Market Guide

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