Federal Reserve

When it comes to owning a home, many factors can affect your mortgage rate, one of which is the Federal Reserve. Indigo Mortgage New Mexico is here to help you understand how the Federal Reserve impacts you and your home mortgage loan.

The Federal Reserve system is the central bank of the United States. It performs five general functions to promote the effective operation of the U.S. economy and, more generally, the public interest. The Federal Reserve rates can impact mortgage interest rates; however, they do not directly impact mortgages. The Federal Reserve sets borrowing costs for shorter-term loans, like credit cards and auto loans, by altering its federal funds rate.

Mortgages, on the other hand, track the ten-year Treasury rate. Changes to the federal funds don’t directly impact the rate on the ten-year treasury. The stock market directly affects the ten-year treasury, as people will move money out of the stock market and into bonds. When the ten-year treasury rate goes up, the popular 30-year fixed-rate mortgage tends to do the same, and vice versa. Rates for fixed mortgages are also influenced by other factors, such as supply and demand. When mortgage lenders have too much business, they raise their rates to decrease demand. When business is light, they tend to cut rates to attract more customers. This is why a mortgage broker like Indigo Mortgage is so competitive for low mortgage interest rates, because we have a variety of lenders we work with. This allows us to choose the mortgage lender offering the best mortgage rate at that time.

Many factors come into play concerning home mortgage rates. Purchasing a new home can be intimidating, but it doesn’t have to be. The experts at Indigo Mortgage are here to make the buying process smooth and pain-free. Contact us for more information!

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