CNC Mortgage Blog

When the Fed dropped the overnight bank rate 0.75% early on Tuesday January 22, we saw a big drop in mortgage interest rates that day and early on Wednesday. For a brief period on Wednesday rates bottomed out where a 30 year fixed mortgage was available at 5.125%. This joy lasted 20 minutes and then they have been increasing to today´s level that approach 5.5%.

Historically there has not been a strong correlation between the Fed funds rate and mortgage rates. Keep in mind that the Fed rate is what banks are charged for overnight loans. These typically affect loans tied to prime, such as home equity loans and credit card loans. Mortgage loans closely parallel the yield on the ten year treasury bond.

I usually don´t dare to stick out my neck with predictions as to the trend for mortgage rates, HOWEVER…. I don´t think they are going to go down soon from these levels of 5.5% on 30 year fixed and 4.875 to 5% on 15 year fixed loans for these reasons:

• Banks are flooded with refinance applications
• Banks have reduced personnel in the last year
• Rates are already near 45 year lows

So after looking at the little crystal ball on my desk, I suggest that you get your application in soon with a 45 day lock. Most lenders or brokers will let you float down the rate if there is an improvement.