🏡 What’s the Difference Between the Fed Rate and Mortgage Rates?
You might hear people say, “The Fed is changing rates!” and wonder what that means for buying a home. Let’s break it down in a super simple way.
🏦 What Is the Fed Rate?
The Federal Reserve, or “the Fed,” is like the boss of all banks in the U.S. When the Fed changes its rate (called the Federal Funds Rate), it’s telling banks how much it costs to borrow money from each other.
Think of it like this:
If your friend charges you more to borrow lunch money, you might charge someone else more too. That’s kind of what happens with banks.
🏠 What Is a Mortgage Rate?
A mortgage rate is the interest you pay when you borrow money to buy a house. It’s what makes your monthly payment go up or down.
But here’s the thing: mortgage rates don’t follow the Fed rate exactly. They’re more like cousins—not twins.
🔗 How Are They Connected?
When the Fed lowers its rate, it’s trying to help the economy by making it cheaper to borrow money. This can influence mortgage rates to go down too—but not always right away.
Mortgage rates are also affected by:
- Inflation (how much prices are rising)
- The bond market (where people invest money)
- What investors think will happen in the future
So, even if the Fed drops its rate, mortgage rates might stay the same—or even go up—depending on what else is going on.
📊 What Does This Mean for You?
If you’re thinking about buying a home or refinancing, it’s smart to watch both the Fed and mortgage rates. But remember: they’re not the same thing.
You can check real mortgage rate trends at https://www.fhfa.gov, which is a trusted government website.
