Why do all mortgages have similar rates? Why do they all depend on the fed rate? Wouldn’t some banks offer lower rates to obtain more customers?

Question

I know what the fed funds rate is. My question is WHY do they all follow it? If I’m selling something and my competitors are at 7%, why wouldn’t a bank do 6% to capture the market?

In: Economics

Answer 1

Banks are the middleman for government loans.

The fed loans money to the bank, and the bank re-loans it to a customer.

The bank’s rates mirror the fed’s rates because they are the same rate, plus a small markup so the bank makes a profit.