Interest rates and their impact
The spotlight's on interest rates today -- the Federal Reserve, trying to stem more economic pain, announced early this morning that it is cutting its benchmark rate by half a percentage point -- so what better time to check in on the rates that matter most to homebuyers?
Zillow.com, which has a "mortgage marketplace" where borrowers can get quotes from lenders, says the average rate quoted for Marylanders last week was 6.02 percent for a 30-year fixed mortgage. That's down slightly from the week before but is tied for third-highest among the 20 states with the highest volume of quotes, Zillow says. (Lowest was Georgia, at 5.88 percent.)
Americans planning to buy in the next two years told Zillow in a survey that their top concern was interest rates (two-thirds called that a worry), followed by local property taxes, the purchase price and closing costs.
Rates are actually lower on average than they were last year or in 2006, according to Freddie Mac's data. But they've been bouncing around so much in recent months that buyers probably don't know what to expect.
Sign up for the At Home newsletter 
Comments
Hello Jamie,
There seems to be a disconnect between the fed interest rates and mortgage rates these days Do you (or for anyone for that matter) have any sense of whether the latest lowering of the interest rate by the government will manifest in lower mortgage rates?
On another note, my real estate agent called to say that house prices are dropping like crazy. Perhaps this is the sellers capitulation that many of us buyers have been waiting for?
Posted by: James | October 8, 2008 3:40 PM
Most experts I've talked to say the Fed's impact on mortgage rates is much lower than advertised -- I mentioned its move today only because it falls under the broad category of "interest-rate-related."
That's interesting, the trend your agent is noticing. Thanks for the heads up.
Posted by: Jamie Smith Hopkins | October 8, 2008 4:55 PM
Mortgage rates & the Fed rate are totaly different. In most cases mortgage rates go up when their is a cut in the fed rate as they did on Wensday.
Posted by: Brian Kelly | October 9, 2008 3:04 AM
It's not that the Fed has no effect -- it's simply a complicated one. For instance, cutting rates at a time of rising inflation could help force mortgage rates upward, or at least that's the argument mortgage experts have made.
Posted by: Jamie Smith Hopkins | October 9, 2008 6:14 AM
Didn't you do an article that correctly pointed out that short term interest rates have little to do with mortgage rates? In fact, they have very little. They are two totally different things. One is short term the other is long term... i.e. If you bought a car today would you buy it at the current short term interest rate -or- at the long term - where you thought the economy was going? It could be 10- 12% five years from now.
Most people I talk to, think mortgage rates will go up in the next year.
Mortgage rates have a lot of pressure right now. We are betting on a robust American economy in the future.
Posted by: Dunn | October 9, 2008 12:47 PM
Yup, that was a How-to Monday post (which you can find at http://weblogs.baltimoresun.com/business/realestate/blog/2008/09/howto_monday_mortgage_rates.html).
But the Fed does have some impact, just a complicated one. My response to Brian Kelly above was drawn from the reporting for that How-to.
Posted by: Jamie Smith Hopkins | October 9, 2008 12:51 PM