Move My Realty - Real Estate News

The Fed lowered interest rates, so mortgage rates are sure to follow … right? Well, no. And maybe yes, too. Adjustable-rate mortgages, which allow lenders to adjust a mortgage’s interest rate over time, tend to follow interest rate cuts. Fixed-rate mortgages are different, however, and tend to fluctuate based on the yield of 10-year government bonds. And those bonds are not impacted by interest rates as much as investor demand for them at their current rate of return. But inflation remains the big enemy of bonds because rising prices can sap the value of these long-term investments. In this case, the recent Fed decision to lower interest rates a full half point simultaneously sparked a fear of inflation by investors – and that, in turn, will probably increase FRM rates over the short-term even as it lowers the ARM rates.