Fed cut has had opposite effect on long-term mortgages

September 26 2007 MarketWatch.com Greg McBride, senior financial analyst for BankRate.com, says that many would-be home buyers are about to be stripped of a misperception, namely the idea that when the Federal Reserve Board is cutting interest rates mortgage rates will fall as a result. In a radio interview with Chuck Jaffe, MarketWatch senior columnist, McBride noted that the Fed is combating the economy, but some observers worry that its bigger-than-expected move might be opening the door to inflation, a concern which has pushed mortgage rates up slightly since the Fed's most recent move. McBride noted that the Fed's rate cut is bad news for long-term savers, as rates on certificates of deposit maturing in two or more years have fallen, while short-term rates have remained steady. This erases any risk premium that a saver gets for tying up money for a longer stretch of time.

More

See Today's Mortgage Rates
Email this article to a friend | Send us a comment