Yesterday, the Federal Reserve cut it’s benchmark interest rate by 0.25%, making the third cut in 2019.

This cut only effects the short-term rate it controls, which influences many loans, but does not directly effect most loans. For instance, long-term rates like a 30-year fixed did NOT magically drop today from yesterday.

Unfortunately, this fact is constantly misreported in the media. The truth is the only thing the Fed controls is the Fed Funds Rate, which is the rate the Federal Reserve charges when it lends to depository institutions, or the rate in which banks and other depository institutions lend to each other, and usually on an overnight basis.

The Fed Funds rate does effect some rates indirectly, especially short-term loans, like credit cards, auto loans, and maybe home equity loans, as lenders typically set their rates based on the prime rate, which is the base rate at which lenders charge customers.

Confused yet? Don’t worry, most of people are.

When it comes to long-term fixed mortgage rates, the Fed Funds rate is just a small portion of all the elements that go into your mortgage interest rate. Other items that make up rates are the mortgage backed security bond market, what is going on in the world, stocks, and more. Heck, many times mortgage rate trends don’t even follow the Fed Funds Rate at all. At this moment, long-term rates are near historic lows compared to the overnight rate, leaving more room for rates to go in the opposite direction of what the fed’s do.

Your best best is to simply have a really good Loan Officer in your corner, like a Cambria Mortgage Loan officer, with plenty of experience and knowledge of the markets, with a game plan for locking or floating an interest rate for any loan currently in process, and you’ll never find that at the banks, or any of the big online lenders.