February 12, 2009
ARM vs. Fixed
Adjustable Rate Mortgages (ARMs) are the types of mortgages that are affected by the rate cuts that the government has made because they are controlled by indexes which closely mimic the Federal Lending Rate (which is what the fed can cut or raise).
Fixed Rate Mortgages, however, are affected by the bond rates. There is usually a trickle effect to the bond rates when the Feds cut the Federal Lending Rate, but it’s not immediate. So what does affect bond rates? Anything that triggers people to move money from their stocks to their bonds (or vice-versa) affects bond rates. So when the economy is a bit shaky or consumer confidence is going down, rates tend to go down with it: things like a presidential election or bad news about the war or other things we hear about from the media. Rates tend to go up when people move money out of bonds and into the stock market because that affects the bond rates negatively. So, great news like the feds cutting the Federal Lending Rate, believe it or not, usually causes a momentary small jump in mortgage rates.
If you would like to see the current interest rates, all listed homes in Utah or a list of Bank Owned homes in Salt Lake, Davis and Weber counties, visit my website at BradSearsTeam.com.
Posted By: 
Brad Sears
Tagged With:
adjustable vs. fixed rate mortgages,
bonds,
federal lending rate,
the fed
and what influences what
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