The Federal Reserve doesn't set mortgage rates. Federal Reserve policies do influence the overall price of money in the marketplace as they manipulate their primary policy tools, which include the Federal Funds rate, Discount rate and interest they pay banks for holding onto excess reserves for them. The Federal Funds rate (an interest rate on overnight loans made between banks) -- and the Discount rate (a bank's cost of borrowing money from the Federal Reserve directly) both serve to increase or decrease a bank's costs of borrowing money to lend.
The Fed also can manipulate mortgage rates by directly intervening in the market for Mortgage-Backed Securities, something they have done at times when financial markets have seized up. HSH.com tracks the latest moves by the Federal Reserve and any effects their actions may have on mortgage markets and mortgage rates.
Outside the Fed's influence, mortgage rates and mortgage availability are a different story, though, and a much more complex one involving both primary and secondary mortgage markets, investor whims and desires and more. If you're interested, you can learn a lot about what moves mortgage rates and how the mortgage market works on HSH.com.
