Good morning! It’s just before 7:00 am PST as I’m writing this post. In a couple of hours, we’ll hear the announcement from the FOMC wrapping up their two day meeting on measures they will take to get inflation in line, which includes adjustments to the Fed Funds rate. The Fed Funds rate does not directly impact mortgage interest rates (except for HELOCs attached to the Prime rate), however the action the Fed takes does influence the direction of mortgage interest rates. Mortgage interest rates are based on bonds (mortgage-backed securities or MBS) and react similarly to stocks. Inflation is the “arch enemy” of bonds, which is a big part of why mortgage rates have been higher these past few years. Should the Fed indicate that inflation is taming and investors believe what the Fed is saying, we should see mortgage rates improve…and of course, the opposite is true.
Debts that have interest rates based on the Prime rate, like HELOCs and credit cards, are impacted by what direction the Fed takes with the Fed Funds rate because the Prime rate is based on the Fed Funds rate. This is why HELOC interest rates are higher and credit card interest rates are ridiculously high.
As I’m writing this post, MBS pricing (mortgage backed securities) are improved by roughly 26 bps. This does not always translate to an improvement in rates sheets or pricing to us consumers…but it’s the trend that is needed for mortgage rates to improve.
Stay tuned! I will be updating this post throughout the day.
11:30 am PST: MBS are now down 16 bps. Fed Chair Powell announces no changes to the Fed Funds rate. This was widely inspected by investors. Now let’s see what Fed Chair Powell has to say regarding inflation….
2:00 pm: MBS are down 39 bps after the Fed indicates they intend to keep rates higher for longer with the possibility of a future rate increase.
You can see in the graphic below how mortgage-backed securities (which mortgage rates are based on) moved throughout the day. The lower the blue area, the higher the rate (or pricing for the rate) is.
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If you have been wanting to spruce up your kitchen, bathroom or any part of your home and you don’t want to touch your low interest rate on your existing mortgage, a second mortgage could be an option worth considering. 
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