We have been approved for a VA loan and are discouraged from buying a home at this time because the interest rates are higher than they were at the beginning of the year. The feds cut the interest rate one half percent so why is the VA interest rate up instead of down?

The Federal Reserve does not actually cut rates. They either add or extract liquidity from the banking system to hopefully impact fed funds rates which are overnight loans from one bank to another. When the press states that the Fed has cut rates, it is a misnomer in that they have only adjusted the "target" for the fed funds rate.

Lowering the target is designed to stimulate the economy which by nature has an inflationary impact and can then trigger a rise in long term rates. When the Fed raises the target, it is designed to slow the economy in order to control inflation.

In today's case, the Fed action increased long term rates in that the 10 year treasury yield has risen in recent weeks from 3.45% to 3.95%.

We anticipate that interest rates will continue to rise to much higher levels than over the previous 7 or 8 years. So waiting for rates to go back down may be a long wait. Click here for VA Home Loan Daily Rates.