Mortgage Rates Rise Even With Federal Reserve Rate Cuts

You would think that mortgage rates would fall with the Federal Reserve cutting rates this week, only to see them rise. According to Bankrate.com, mortgage rates are up .17% this week with the 30 year at 6.17% as of December 12, 2007. How can this be, when the Federal Reserve has been cutting rates for the last six months and also infusing capital into the banking system. Contrary to opinion, a Fed Rate Cut does not necessarily represent that all rates will decrease. Since there is still a credit crunch and the housing market in disarray, banks are hesitant to take on risks with the Real Estate market and therefore mortgage rates are staying high.
This is not a rate that the consumer sees, but the cost to banks to borrow from the Federal Reserve. Essentially it breaks down to the banks borrowing money at 4.29% and then lending it to the public at 6.17%.
Data Source: FederalReserve.gov
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