All eyes are on the Federal Reserve to see by how much they raise the Fed Funds rate. Most are predicting an increase of between .75% – 1.00%. What will that do to mortgage rates?

What is Fed Funds Rate? The federal funds rate is the interest rate at which depository institutions lend reserve balances to other depository institutions overnight on an uncollateralized basis.

The Fed Funds rates has more influence on credit card, home equity lines of credit and auto loans than is does on mortgages. Although there is some connection, it’s usually a lag effect. It seems like the last few times the Fed has increased the Fed Funds rate, mortgage rates have actually fallen. The mortgage bond market factors in what the market is expected to do, so the move later this week has already been priced in current rates.

Here’s a recent quote for a customer that was shopping for a VA loan. Sales prices $535,000, with $200,000 down, financing $335,000. Exempt from the VA funding fee, 800 Fico score, the rates was 5% (5.385% APR) in Lakewood, WA.

For a detailed VA home loan quote, please call 253-472-1500 or email kevin@vahomeloans.com.