"Well, we're just now seeing the reductions in mortgage rates. The mortgage rates are based on the ten-year rate and the Fed controls the overnight or the shorter rates"

In the quote by Franklin Raines, there are a number of crucial elements associated to the characteristics of interest rates and their effect on mortgage rates. Let's break down the statement:

1. ** Timing of Mortgage Rate Reductions **: The phrase "Well, we're just now seeing the reductions in mortgage rates" suggests a recent or continuous decline in mortgage interest rates. This suggests a shift in the market that potentially affects property buyers and those looking to refinance their homes. Lower home loan rates normally make borrowing cheaper, allowing more people to manage mortgage and stimulating the real estate market.

2. ** Ten-Year Rate Influence **: Raines mentions that "home loan rates are based upon the ten-year rate," describing the yield on the ten-year U.S. Treasury bond. Home mortgage lenders frequently utilize the ten-year Treasury rate as a standard since it is viewed as a steady indicator of long-lasting interest trends. When the ten-year yield decreases, it frequently leads to lower home loan rates as lending institutions adapt to keep competitive in the market while guaranteeing their margins line up with wider financial conditions.

3. ** Federal Reserve's Role **: Raines keeps in mind that "the Fed controls the overnight or the shorter rates," which are rate of interest on short-term loans or reserves held by financial institutions at the Federal Reserve. The Federal Reserve (Fed) straight influences short-term rate of interest through policies such as the federal funds rate. While the Fed doesn't straight set long-lasting rates, its policies can indirectly impact them. For instance, when the Fed reduces short-term rates, it can promote economic growth, possibly causing reduced long-term rates with time.

In summary, Raines is highlighting the difference in between various kinds of rates of interest and their specific impacts on home mortgage rates. Mortgage rates are primarily depending on longer-term trends influenced by the ten-year Treasury yield, while the Fed controls shorter-term rates, which can indirectly affect long-lasting rates. This relationship is important for understanding how financial policy and economic elements interact to form the housing market and loaning costs.