15 Year Mortgage Rate Confusion

[William Coet]

We were quoted 4.75 apr for a 15 year mortgage. The lender said rates have been going up.  This is confusing because the fed has been lowering rates. 

-4.75 is well above the average 3.02 posted on other sites that aggregate data for rate.  Why would this rate be so much higher than the average?

-Why would the lender state that rates have been going up if the fed has been lowering rates?  Are they not related?

Thank You

[Chris Mason]

Originally posted by @William Coet:

We were quoted 4.75 apr for a 15 year mortgage. The lender said rates have been going up.  This is confusing because the fed has been lowering rates. 

-4.75 is well above the average 3.02 posted on other sites that aggregate data for rate.  Why would this rate be so much higher than the average?

-Why would the lender state that rates have been going up if the fed has been lowering rates?  Are they not related?

Thank You

 The bank or mortgage company they work at might be juicing up their rates to pay out underwriter/processor/etc overtime pay since we're in a refi boom. Other lenders elect to keep their rates low, not pay out overtime, and their turntimes go to crap (5 pm sharp, everyone stops). It's a choice that each lender makes - at the middle management level - whenever there's a refi boom on. When it's a refi boom in the middle of the summer buying season, that's even more true.

15YF are also a minority of loans compared to 30YF. If a person in middle management capital markets has to make a choice between selling the mortgage into an MBS pool that will yield better 30YF rates or better 15YF rates, 30YF would be the choice most make.

Also FYI there is no direct link between the federal funds rate (interbank and overnight) and mortgage rates (consumer and long term). The federal government does not set private sector mortgage rates, we aren't in a communist country. :) The federal funds rate is just the rate that the Federal Reserve Bank will lend at overnight to private sector banks, what those private sector banks do is then entirely up to them, but obviously borrowing at a daily interest rate and then lending for 15 or 30 years isn't what they are doing (they'd go bankrupt).

That being said, that rate on a 15YF seems absurd. I'm over here trying to make up a scenario that bad, and I'm having to assume FICOs in the mid 600s, among other things, to come close....