How Are Interest Rates Set?

Here's an article that addresses a question that pops up on a regular basis. When we see the Fed lower it's rate and mortgage rates jump, it causes a bit of confusion. Hopefully this will help explain why...

"...home-loan rates are influenced by longer-term economic indicators. The Federal Reserve Board’s benchmark rate, the federal funds rate, is the interest that banks charge one another for overnight loans. And that, in turn, is closely tied to the prime lending rate that the banks charge preferred customers."

For the entire article, click here.