The Real Deal Miami

Thinking of a mortgage? Don’t fret about the Fed

Current interest rates and loan affordability are the most important factors

July 18, 2015 12:00PM

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The bond market moves mortgage rates.

People should not worry about what the Federal Reserve might do, or not do, when deciding to finance or refinance a home.

A mortgage borrowing decision should be based solely on current interest rates and whether a loan is affordable.

There is widespread anticipation that, as soon as September, the Fed will raise the interest rates that banks charge each other for overnight loans, which has been near zero since 2008.

But it is safe to assume that no one on Wall Street or anywhere else can accurately predict what the Fed will do next or whether interest rates will go up or down in the next month.

Besides, the overnight inter-bank lending rate that the Fed manages has an indirect link with mortgage rates, which are based on long-term interest rates.

Long-term interest rates are set, not by local bankers, but by the global bond market, valued at $21 trillion. [New York Times]Mike Seemuth