International and Domestic Colorado Real Estate

Let me start by defining what certain rates mean and translate this back into what triggers mortgage rates to move. What the Fed cut on January 22nd by 0.75% and then again on January 30th by another 0.5% is the FED FUNDS rate. The cumulative drop brought the Fed Funds rate down from 4.25 to 3.0%, currently. What the FED FUNDS rate is what banks charge other banks on overnight loans and as such is totally controlled by the Federal Reserve (not to get off on a tangent, but to quickly explain the reason that banks loan money to other banks is because they need to keep a minimum amount of cash reserves in deposits; they cannot reinvest everything). Where in the mid-to-long term, the Fed lowering the Fed funds rate is usually a good sign for other interest rate indices to follow that pattern, often in the short-term, interest rates move opposite from the Fed Funds move. This is what has happened this past few weeks.The main correlative factor in determining 1st trust deed mortgages rates is the 10-YEAR US TREASURY BOND. This index is traded on the open market every business day and as such is not directly controlled by anyone (it works just like the stock market). Initially, after the Jan. 22 Fed rate cut, the benchmark 10-year T-bond rallied. Conforming loan rates (loans $417,000 and under) came within 0.5% of the 50 year lows we hit in August 2003 & March 2004. In the last hour of the day on January 23, there was a major sell-off in the 10-year bond, causing the yield to go up (this money was in large part transferred to stocks and hence, why the Dow had a 600 point reversal in that last hour). On January 23rd, the 10-year bond hit a low of 3.30, but has risen to 3.67 at the close of Jan. 30; this has caused mortgage rates to go up approx. 0.5% in the past week.