Yesterday, the Fed lowered interest rates one-half a percent. The Fed Fund Rate now stands at 1.5% and the Discount Rate is 1.75%. What do you think happened with home mortgage rates? No, they did not go down but went up instead one-half a percent. A 30-year fixed loan at zero points for Palos Verdes real estate (and elsewhere) is 6 .375% conforming, 6.5% jumbo conforming and 7.5% for jumbo loans.
“Why the increase?” you might ask. The word on the street is that this 1/2% increase in mortgage rates may be an aberration but is probably because the Federal Government has to sell tens of billions of dollars of Treasury Bills this week to cover debt. The Government had to sell them at a discount which makes the yield higher. Some of the rate increase may also be profit taking by the lenders.
Of course, 6.5% interest fixed for 30 years is still a good rate. Only in the last five out of 35 years has the rate been lower. And today’s 6.5% rate is with zero loan points!
