Mortgage Rates Are Dropping
Key Points
Mortgage rates are primed to fall again after the Federal Reserve’s latest dramatic policy moves to combat the economic impact from the deadly coronavirus pandemic.
The Fed on Sunday said it will begin buying $200 billion of mortgage-backed bonds, a move that will stabilize and likely lower mortgage rates, which moved sharply higher last week.
Mortgage rates had fallen to a record low two weeks ago, but a flood of refinance applications overwhelmed lenders and caused investors in mortgage-backed bonds to back off.
Mortgage rates are primed to fall again after the Federal Reserve’s latest dramatic policy moves to combat the economic impact from the deadly coronavirus pandemic.
The Fed on Sunday said it will begin buying $200 billion of mortgage-backed bonds, a move that will stabilize and likely lower mortgage rates, which moved sharply higher last week. This is part of a brand new, $700 billion round of quantitative easing in response to the COVID-19 crisis. The central bank also slashed rates to zero.
Lower rates will help those stressed by temporary employment losses, although the government has so far not addressed the potential spike in mortgage delinquencies those losses could cause.
“As was done during the QE phase of the Great Recession, the Fed purchasing MBS should help cushion some of the blow to Americans by potentially lowering their mortgage payment or giving them an incentive to buy a home,” said Dave Stevens, former CEO of the Mortgage Bankers Association and former commissioner of the FHA.
“By acting swiftly to tamp rates down and pledging ongoing support, the Fed may have ‘flattened the curve’ in the housing market – diminishing some of the urgency households may have felt to buy or refinance now less they miss out and keeping demand strong further into the future,” wrote Danielle Hale, chief economist at realtor.com. “However, the Fed is acting because the path ahead for the economy is uncertain, and the housing market could be impacted directly and indirectly.”
“MBA expects these actions will lower mortgage rates, helping homeowners save money through refinancing, and thereby providing a boost to the broader economy.”
This has all been an effort to quell the rising sense of fear with regard to the happenings of the economy in response to COVID-19. So far, current homeowners are reaping the rewards and refinancing in droves to capitalize on the lower interest rates. New home buyers are a little on the fence, but with the Government injecting funds to keep sectors of the economy moving and liquid, the affects of the coronavirus will be mitigated and softened. The idea is to spread out the affects so that no one industry, company, person feel the full brunt of a stalled economy. This means you, the general consumer, are better poised to keep moving forward, despite the lack of toilet paper.
At American Freedom Funding, we too have felt, and are currently feeling, the rush to refinance and/or buy in these unforeseen times. We are prepared though, we have been setting up our team to handle the influx of questions and requests for lower rates.
If you’re curious to know what you qualify for, or how much you can save on your monthly payment, give us a call today. We are here for you and we are ready with answers.