Federal Reserve Myth about Interest Rates

Just because the Fed cuts the Fed Funds Rate, your interest rate will not necessarily follow. Mortgage interest rates on first mortgages have more to do with how the stock market is doing that what the Federal Reserve is doing. For instance, the Fed cut their rate by 1.25% in 2008 so far. If this had translated across the board to mortgage rates, you would be able to get a mortgage for under 5%. This is not the case however, rates are closer to 6.5% now. If you have a second mortgage, you have probably noticed that your rate has dropped. The fed rate is tied into the prime rate of interest which home equity lines or heloc mortgages are tied into.

You gotta think that someone is making money off of this. I can tell you that it is not the little guy. Do buy into bank advertising that rates are down since the Fed cut rates. The reality is they are not.

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