The Federal Reserve constantly evaluates the US economy and, whennecessary, takes steps to address inflationary concerns and avoid economicrecession or depression. The mass media, in turn, reacts by providing a widerange of opinions and interpretations of the Fed's monetary policy. This canmake it very difficult for consumers to decipher how such actions will influenceinterest rates in general and mortgages in particular.

And although actions of the Federal Reserve can have a direct impact on thePrime rate, mortgage interest rates are dictated by the trading ofmortgage-backed securities, which are similar to bonds and trade on a dailybasis. This means that the real dynamic at the heart of interest rate movement isthe competitive relationship between stocks and bonds.

Stocks, bonds, and mortgage-backed securities compete for the same investment dollars on a daily basis. There isliterally only so much money to be invested. When the Federal Reserve feels that interest rates need to be decreased inan effort to stimulate the economy, this reduction in rates can often cause a stock market rally. When the market becomesbullish, the money to invest in stocks comes from the selling off of other investments, including mortgage-backedsecurities.

Unfortunately, when mortgage-backed securities are sold off to fuel stock market rallies, this causes interest rates to goup, not down.

Historically, there have been many instances where the Federal Reserve has increased interest rates, arousing fears thatcorporate profit margins would be affected. This resulted in stocks being sold off, leading money managers to search for aplace to invest their newly liquidated assets until the next market rally. One such safe haven has been mortgage-backedsecurities, which cause mortgage rates to drop.

The daily ebb and flow of money is what matters most when it comes to the movement of mortgage interest rates. I makeit a point to continuously monitor interest rates for my clients and advise them of opportunities to manage their mortgagedebt at a better rate. This is the foundation of my business model as a trusted advisor.

If media reports have led you to second guess whether it's a good time to purchase a new home, give me a call.We'll analyze your financial situation together and create a plan that's right for you.