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American Morning

Ask CNN: Why aren't my home mortgage rates getting any lower if the Federal Reserve keeps lowering interest rates?

Aired July 13, 2001 - 09:24   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
(BEGIN VIDEOTAPE)

UNIDENTIFIED CORRESPONDENT: A CNN viewer asks, "The Federal Reserve keeps lowering interest rates, but my home mortgage rates are not getting any lower. Why?

CLARK HOWARD, SYNDICATED CONSUMER ADVOCATE: What a puzzle. You know, you keep hearing report after report about interest rate cuts. We've now had seven of them over the last six months. So why are mortgage rates not going down? In fact, in some cases, why have they gone up?

Because what the Federal Reserve controls are very short-term rates, and that makes no difference at all when it comes to your mortgage. Mortgage rates are based on what people think is going to happen with inflation. The more the Federal Reserve cuts rates, that makes the economy potentially stronger, people get worried about inflation and therefore mortgages end up costing more.

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