There is a common myth out there in the mortgage industry that the Federal Reserve controls the mortgage rates. This myth is not entirely accurate. The way that mortgage rates are determined is by the activity in the 30-year treasury bond. The Federal Government controls 3 interest rates. With these rates that they have control over, they decide what happens in the bond market. Whatever happens in the bond market, similar to the stock market, effects the trading of the 30-year treasury bond.
As previously stated, the Federal Government has control of 3 rates. These rates include the Prime Rate, the Federal Funds Rate, and the Discount rate. None of these rates have control over mortgage rates. When it comes to home equity lines, the prime rate is involved, but on the 30-year fixed regular mortgage its actually effected by the 30-year T-Bill. In summary, it has to do with how the market perceives these movements that the Federal Government makes to these 3 interest rates that ultimately determine where the mortgage rates are going to be.
So, you never really know how the bond market is going to perceive what the Federal Government does. The important thing to know is that you need to work with a loan officer who is going to be ethical with you, give you all of your options, and tell you the truth.