The Federal Open market Committee, which famously meets periodically to talk about the economy and interest rates, is having a meeting today and tomorrow. And it may decide to "raise" interest rates. But does that mean mortgage rates will go up as a result? Nope.

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In fact, you could argue that the fed affects long-term mortgage rates about as much as it affects the outcome of the Super Bowl. What the fed can influence is the Federal Funds Rate.

So, what's the Federal Funds Rate?

Banks and other depository institutions by law have to maintain a certain level of deposits, called reserves, with the Federal Reserve Bank. That's to make sure there is cash to pay depositors when they want it. The Fed doesn't just leave the reserves in a vault, however. The money is lent to banks overnight to cover varying needs for cash. The Federal Funds Rate is what is charged for these funds. So when the Federal Reserve "changes" the Federal Funds Rate, all it's really doing is choosing a different rate to target and using its power in money markets to move the rate toward its target.

So, how does the Fed Funds Rate affect mortgage rates?

An increase in the Fed's overnight rate does not cause an increase in long-term mortgage interest rates. In fact, Fed rate cuts can actually trigger slight increases in 30-year mortgage rates! This is because mortgage rates are driven by bond markets and the price of mortgage-backed securities (MBS), which reflect investors' expectation of future inflation. When the Fed cuts rates, more money is dumped into the system, but the resources it can be spent on are limited, so prices increase. Today, the most influential resource is oil. When oil prices rise, investors get nervous and exit the bond and MBS markets, which causes MBS prices to fall and interest rates to rise.Conversely, an increase in the Fed Funds Rate could result in rates dropping a little.

But home equity rates could increase.

Home equity loans often carry interest rates based on the prime rate (which is the rate that banks charge their largest and most credit-worthy customers) shows these two rates parallel each other almost perfectly). And which mortgage product pricing is based on the prime rate? Second mortgages like home equity loans (HELOANs) and home equity lines of credit (HELOCs). So, home equity customers may be the losers in the Federal Reserve rate game.