Fed Rate Cut - What does it mean for mortgage rates?
This will be interesting as the bond purchasing normally picks up when the stock market is down. But given the uncertainty from the Corona Virus, investors don’t trust bonds either. So, by lowering the Fed Funds Rate to 0% and restarting the quantitative easing program (Fed purchasing Mtg Backed Securities) the Fed is looking to stimulate the system to get the bonds moving again. Note that the Fed Funds Rate does not directly relate to mortgage rates which increased over 1% last week. It is the overnight lending rate between banks and does directly affect your HELOC, credit cards and other short term loans.
The cut was anticipated and already built into mortgage rates but now we’ll see how the system responds. Demand still outweighs supply and the system has no more capacity. Our friends at larger banks are turning loans away as they simply cannot continue to write more mortgages. So mortgage rates are still artificially high due to volume issues. Our stance as well as many in the industry is to keep an eye on things for now.
Should you desire to refinance, you’ll want to be in the best possible position to lock when rates come back down. To do this, work with a mortgage professional to help you analyze mortgage strategies and you'll also want to complete the application process now so they can lock your rate when rates drop. They won’t have the time to call multiple clients when that time comes. Of course, our team is happy to help and I invite you to go to www.journeyhomelending.com and click on Apply Today to get started.
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