How does the Feds rate cute effect the mta rate on adjustable rate mortgages?

It probably won't. Most initial rates on ARMs are set artificially low to entice you to take the product as well as to help marginal borrowers qualify in the first place. Once the rate lock expires the rates often rise even if other rates are on the decline since the lender must make up the losses from the initial ';teaser rate'; somehow.





All ARMs have their rates tied to a stated bell-weather rate once the rate lock term expires. An extremely common one is the LIBOR, or London Interbank Offering Rate. That rate has little to do with the Federal funds rate and may move in the same direction or the opposite direction.





The Fed's overnight rate has little affect on mortgage rates overall. It's an extremely short term rate, literally overnight as the name implies and has little or no influence on long term rates such as 15-year or 30-year mortgages. The Prime Discount Rate has more affect on mortgage rates though the link is still somewhat tenuous.





If your rate lock has expired and your rate has risen it will then follow the stated bell-weather rate. If that rate drops, your rate will too. However once rates turn around, so will yours.





If you have an ARM and are nearing your rate-lock expiration, now would be an EXCELLENT time to re-fi to a fixed rate product if you can qualify and the property value hasn't dropped too much. That way you'll lock in the current low fixed rates and won't have to worry about your mortgage payment rising once rates start their inevitable rise in the next year or two.