Search

What is Happening with Mortgage Rates?

In an emergency move Sunday, the Federal Reserve announced it is dropping the benchmark interest rate to zero and launching a new round of quantitative easing in a response to the coronavirus outbreak. This move will likely increase the already massive demand for home financing services and create more volatility in the financial markets. The demand for mortgage services is an industry-wide dilemma that has placed major stress on the overall home lending system. There is only so much bandwidth to accept and process files at one time, and that level has been reached across the country. This is a very fluid situation, and mortgage brokers are working incredibly hard to continue to move loans through our system quickly to closing.

Mortgage Brokers have received an incredible amount of communication and questions over the past few weeks and again today after the Fed announcement. Here are a few general responses to some FAQ’s:


What is happening with mortgage rates?

There is no clear answer at this point. Mortgage rates recently hit historic lows and the demand for home financing has caused investors to be overloaded. In an effort to slow the applications from borrowers the big lenders have raised their rates to the point where potential borrowers elect not to apply for a loan. i.e. 4%+ on conforming 30 year fixed rate loans. That being said, given the recent commitment by the Fed to purchase $200 billion of agency-backed mortgage securities, interest rates should remain low for the foreseeable future. But as always, the truth of the matter is these are unprecedented times and no one knows for certain what rates will do long term. If purchasing a home and the corresponding payment associated with an available loan rate works in your budget then perhaps take the “bird in hand” approach. When considering a refinance it is my advice to look at the “no” or “low” cost options and use a “Does this make sense for me?” mentality.


What does the Fed Cut mean for my mortgage rate?

It does NOT necessarily mean lower long term mortgage rates. Please see companion article Fed Cut FAQ summary.


How can I get an even lower rate?

Once your file is “clear to close” and if the market has improved in a significant manner since the time of your lock it may be possible to float down your rate. But first things first: work with your mortgage broker and provide them with the information they need to help get your file ready to close.

27 views

Recent Posts

See All

Most (and Least) Expensive States

If you could live in any U.S. state, which one would let you keep more of your money than others? The answer turns out to be surprisingly complicated. Most people would look first at state income tax

Highlights of the New Relief Package

The U.S. Congress recently passed, and the President signed, the 5,593 page Consolidated Appropriations Act of 2021—and experts are still mulling over what the impact will be on ordinary citizens. Th

2020 Year-End Investment Market Report

It would be hard to imagine a stranger year in the U.S. investment markets than the one just passed, or a year that did a better job of defying logic. After the dramatic market collapse that began on

Subscribe to get upcoming resources, news and webinars!

Investment advisory services offered through Arete Wealth Strategists, a Minnesota Registered Investment Advisor. Telephone number 888.544.3250. Arete Wealth Australia may offer investment advisory services in the State of Minnesota and in other jurisdictions where registered or exempted. Please click here for more important disclosure