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Does the Federal Funds Rate Affect Mortgage Rates?


Does the Federal Funds Rate Affect Mortgage Rates?
The short answer: No.

This graph contrasts the movements of the weekly average Federal Funds rate against the movements of the weekly 10-year Treasury Constant Maturity and those of the average 30-year fixed rate mortgage and 5/1 Hybrid ARM. It covers a time period of the last three years.

Sources: Federal Reserve, HSH Associates.

For more about Fed Funds, mortgage and other loan rates, click here.

Federal Funds and Mortgage Rates

The ultra-short-term Federal Funds rate -- an overnight lending rate between banks -- has little direct influence on longer-term rates, such as those found on mortgage loans. These are more likely to be influenced by moves in longer-term Treasuries, such as the 10-year seen above.

For more on why mortgage rates move, read What Moves Mortgage Rates? (The Basics)

HSH grants permission to utilize this graph providing that the graph and its contents are not altered in any way.

Click here for a list of indexes for Adjustable Rate Mortgages.

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