Operation Twist and How It Impacts Mortgage Interest Rates

Published on September 21, 2011 by

Comparing 30-year fixed to Fed Funds Rate (1990-2011)

The Fed Funds Rate is not always going to parallel with mortgage interest rates. You can see clearly in the graph above how the spread between interest rates and the Fed Fund Rate will change over time. The Fed met today and announced Operation Twist.

Keep in mind that the mortgage interest rates are not set by the Feds. Rather the best way to keep an eye on what interest rates are doing is to watch the price of mortgage-backed bonds. There is very little consistency between the Fed Funds Rate and the mortgage interest rates where there they have been separated by as much as 5.29 percent, and have been as close as 0.52 percent.

Currently the spread/difference is 4% which means that there is plenty of room for the interest rates to move both up and down. Although based on the economy and the announcements from Ben Bernanke you could expect interest rates to remain low until the middle of 2013.

Interest rates continue to stay at record breaking lows. If you are in a position to purchase or refinance your home then you are very fortunate and will realize significant savings. With VA Home Loans the veterans are saving thousands of dollars with a simple streamline that lowers their interest rate and it takes very little effort to qualify. If you have a VA Loan and have questions simply contact a VA Loan Specialist for a free consultation (866) 825-6261.

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