The government doesn’t set the interest rates for a mortgage, but its various agencies can make influence over them.
Case in point: the Federal Reserve.
The Federal Reserve is the government group whose job is to set monetary policy that keeps the U.S. economy running smoothly.
The most well-known Federal Reserve tool is the Fed Funds Rate, an interest rate that banks use to borrow money from each other overnight.
The Fed votes on what to do with the Fed Funds Rate eight times per year — every six weeks. When it votes to increase the Fed Funds Rate, it’s an attempt to slow growth nationwide and reduce the pace of inflation.
Conversely, when the Federal Reserve votes to lower the Fed Funds Rate, it’s meant to give a boost to the economy, and nudge inflation rates up.
As a home buyer, changes to the Fed Funds Rate don’t affect you directly. However, when the Fed makes changes, it can ripple through interest rate markets and push mortgage rates higher or lower.
The Federal Reserve doesn’t set U.S. mortgage rates but it’s good to know when they’re meeting because interest rates of all kinds are susceptible to shifts any time the Federal Reserve gets together.
The Federal Reserve’s next meeting is scheduled for October 30, 2019.
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