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Personal FinanceExplainerPast Article

The Funds Rate Is Not Your Mortgage

One is an overnight target for banks. The other is a loan a household may or may not be offered.

By Ruth Hale, Personal Finance Columnist

New York1 min read

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a rack of servers in a server roomPhoto by Kevin Ache on Unsplash

The federal funds rate is what banks charge each other for overnight reserves, inside a range the Federal Reserve sets. A mortgage is a long loan to a household, priced by a lender, often with the thirty-year Treasury and the lender's own spread somewhere in the conversation.

They move in public together often enough that people treat them as the same knob. They are not. The committee can cut the overnight range and a mortgage offer can sit still, or rise, because the long yield did something else that day.

If you are shopping for a loan, the number that matters is the offer in front of you, including the fees. The number in the Fed statement is context.

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