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Mortgage interest
The new Federal Reserve Board chairman, Ben Bernake decided to raise short-term mortgage interest rates by 25 %, which adds up to 4.
75% in Fed Funds target rate.
This rate is commonly used by the banks borrowing funds from each other overnight.
The Federal Funds rates are significant since many other short-term rates are directly affected by them.
Unlike long-term, fixed mortgage interest rates that are proofed from this effect.
So, why did the Fed raise the rates yet again? The fixed mortgage interest rates are more prone to be effected by the inflation, which is what the Fed fears from.
That’s why the long-term mortgage interest rates are separated from the short-term rates.
Investors feeling confident about stability in the inflation levels, see no rational in boosting mortgage interest rates.
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