What Does My Mortgage Have to Do with Wall Street?

by Osman Parvez
Why is it that the Fed is cutting rates but mortgage rates haven't changed? Ever wonder what your mortgage has to do with Wall Street?

I could spend a long time writing about this subject. The simple answer is that a complex web of global financial institutions take monthly mortgage payments and repackage them into securities that other investors and institutions buy and sell. Because the relationship is indirect, the impact to mortgage rates is not linear. A quarter point cut to the discount rate doesn't necessarily translate to a quarter point cut in mortgage rates. Here's a chart that does a great job of illustrating some of the relationships between your mortgage payment and Wall Street. Click the image for a larger view.

Source: IMF's Report on Global Financial Stability

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This document contains forward-looking statements. You are strongly cautioned that investment results are subject to business, economic and other uncertainties. There are no guarantees associated with any forecast and the opinions stated here are subject to change at any time. Always consult your financial advisor before making an investment decision.