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Fed rate's effect on mortgages not direct or always immediate

The short-term federal funds rate, which the Federal Reserve raised Wednesday to 0.75-1.00 percent, can influence rates on longer term loans such as mortgages, but the effects are indirect and not always immediate. In fact, mortgage rates actually dropped a little more than a year ago after the Fed boosted the federal funds rate for the first time since the financial crisis. Here are rates for 30-year mortgages and the Fed rate going back to 2007. While the Fed rate remained fixed from December 2008 to November 2015, the 30-year mortgage rate rose and fell.

The Fed rate charted is the FOMC's target federal funds rate for the end of each month. There were a few months where it changed twice. In cases where there was a range on the rate, always of 0.25 points, we charted the high end of the range. The mortgage rate is the monthly average posted by Freddie Mac, except for the March 2017 rate, which is the latest weekly average. Interactive chart via amCharts.


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