The Fed met this week and decided once again not to make any changes to the federal funds rate. The Federal Funds rate does NOT directly affect mortgage rates however. Mortgage rates are determined by supply and demand for mortgage backed securities on Wall Street. The Fed has been buying these securites in large quantities (which has kept demand high) which will cease at the end of March 2010.
Below is a Chart that tracks Mortgage Rates and the Federal Funds Rate
Federal Funds Rates Vs Mortgage Rates
You will notice that mortgage rates do generally trend in the same direction as the Federal Funds rate. Right now there is actually concerns about deflation. Deflation means the dollar is worth more than it used to be. Deflation will usually equate to lower mortgages rates. I predict that for the next week we will see rates remain fairly unchanged. If you need to lock in, now would be a good time. No one knows what’s going to happen to rates after March 31st, however most predict higher rates are inevitable.
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