MADISON, Wis. – Credit union members, like most consumers, mistakenly think mortgage rates are tied to Fed fund rates, and like most consumers may be holding back applying for mortgages in the hopes that mortgage interest rates will continue to drop. That doesn't surprise CUNA's Vice president of Economics Mike Shenk, but he says it's up to credit unions to educate their members on their pricing philosophy and how the CU makes its rate decisions. "That way they won't be surprised at what you do and don't do," said Shenk. Shenk said members' misunderstanding that long term mortgage interest rates are tied to the Fed fund rate is understandable. They tend to think the two are automatically connected. They don't realize, Shenk said, that while short term rates are tied to the Fed fund, long term rates are connected to supply and demand. Fed rate reductions may in fact have the opposite effect on mortgage rates than what members expect – they may trigger higher rates. "If the bond market thinks the Fed rate cut will be inflationary down the road and over stimulate the economy, it will raise the rates," said Shenk. "In many respects, it's an `iffy thing to try to time the market. Everyone wants to get the lowest rate possible. Most economists can't predict what the mortgage interest rates will be, so for any consumer to try to do so is ludicrous," Shenk said. Historically, credit unions' mortgage rates have been nearly identical to the rates of other financial providers. According to Shenk, credit unions' 30-year fixed rate peaked in May/June 2000 at 8.6%, and it bottomed out in March 2001 at 6.9%. As of June 25, the rates being offered by credit unions, thrifts and banks were 7.18%, 7.09% and 7.19%, respectively. "Members who are holding out for lower rates may be sorely surprised," said Shenk. [email protected]