Fed cut Interest rate Vs mortgage interest dropped?

chan asked:


Why this time when the fed cut interest rate down to 2.75% but the morgatge loan sitll around 6.00%?

In the past (2000), when fed cut then the bank lower their home loan interest.

Marvin

Tags: Home Loan Interest, Interest Rate, Mortgage Interest

This entry was posted on Thursday, April 16th, 2009 at 4:17 pm and is filed under Mortgage Loans. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.

3 Responses to “Fed cut Interest rate Vs mortgage interest dropped?”

1. Conradical Says:
   April 17th, 2009 at 9:42 am

   Ashley

   Mortgage rates are largely based on the rate of inflation and the ability of borrowers to repay the loans. Inflation is fairly low, but home prices are plunging, raising the risk of mortgage defaults.

2. chatsplas@sbcglobal.net Says:
   April 20th, 2009 at 10:28 am

   June

   those are bank rates not mortgage interest rates, bank funds rates
   has more direct impact of ARM due toe standard for rate adjustment
   underwriting standards have also increased and it’s more difficult to sell loans

3. Chris B Says:
   April 23rd, 2009 at 3:35 pm

   Louis

   It’s because the write downs from all the Sub-Prime mortgage backed securities not performing, so the extra yield is being used to offset the balance sheets, also investors don’t want to buy CDO’s (Collateralized debt obligations) because so many people lost money that they wont buy securities at those discounted rates of 4% and 5%, in a normal market a 30yr fixed rate mort is 2% above the ten year bond which is at about 3.5% so the rate should be 5.5% at par and can be bought down with discount to 4% and lower. So to answer your question no Bank will lend those rates cause no one will buy them when packaged into CDO’s