Your Mortgage Minute: The Fed Does Not Set Mortgage Rates

People are often nervous about locking in rates because they hear the Fed is going to raise rates so I thought I would take a minute to explain a part of the system. The Central Bank ("the Fed") is tasked with monetary policy and they have two main objectives: price stability and maximum employment.

Their primary tool for doing this is setting the Federal Funds Rate. The Fed Funds Rate is the rate for overnight borrowing for banks. (Banks are required to keep a certain amount of reserves on hand. They need to balance every evening and if they do not have the proper reserves they need to borrow...