One of the biggest misconceptions I hear is that when the Federal Reserve cuts rates, mortgage rates automatically fall.
That is not always what happens.
I sat down with mortgage expert Jon Brunone to break down the relationship between the Fed and mortgage rates.
The Federal Reserve primarily influences short-term interest rates. Mortgage rates, however, are driven more directly by the bond market, inflation expectations, and what investors expect to happen with the economy going forward.
That is why you can sometimes see the Fed lower short-term rates and then watch mortgage rates move higher the very next day.
For buyers and homeowners, the key takeaway is that a Fed announcement is only one piece of the mortgage-rate picture.
Watch the short below for our quick breakdown.
