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