Even Fed Rate Cut May Not Lead to Cheaper Mortgages

A cut in interest rates wouldn't necessarily mean lower mortgage rates, said HSH Associates.

HSH, which publishes a weekly survey of mortgage rates nationwide, found that they actually rose "considerably" two of the last three times the Federal Reserve cut interest rates.

In July 1995, for example, the federal funds rate was cut 25 basis points, and the average 30-year, fixed rate mortgage rate jumped 18 basis points in the four succeeding weeks.

Again in December 1995, fed funds were cut 25 basis points-but average mortgage rates fell 16 basis points, HSH said.

In January 1996, a third 25-basis-point reduction in the fed funds rate was followed by a 19-point rise in average mortgage rates during the four succeeding weeks.

Fed Chairman Alan Greenspan's most recent remarks about the state of the global economy helped push interest rates sharply lower last week, HSH said. Interest rates will set 33-year lows this week, beating the 6.38% average set in October 1993, HSH predicted.

The Federal Reserve's policymaking open market committee is to meet Sept. 29.