WASHINGTON (AP) – What Fed rate hike?
One week after the Federal Reserve raised short-term interest rates slightly from record lows, the average on a 30-year fixed mortgage went the other way: It dipped to 3.96 percent from 3.97 percent last week, mortgage giant Freddie Mac said Thursday.
The drop is a reminder that the Fed has only an indirect effect on long-term mortgage rates, which more closely track the yield on the 10-year U.S. Treasury. And that yield, in turn, tends to stay down as long as inflation remains low and investors keep buying Treasurys. The 10-year Treasury yield has declined slightly since the Fed’s hike last week.
“The Fed raising short-term rates by itself doesn’t have a very profound effect on mortgage rates,” said Sean Becketti, Freddie Mac’s chief economist.
Back in the mid-2000s, when the Fed raised rates at 17 straight meetings, mortgage rates barely budged, Becketti noted.