Sunday the Fed decided to cut rates by 1% to a range of 0-.25%! Mortgage rates had to drop right? I had calls on Sunday asking about rates at zero and if they could lock in. Sorry……….there is a lot more to it than that! And right now mortgage rates are all over the place!! Here is a bit of information that may help you understand.
The interest rate that the Fed changed is the inter-agency rate – in other words, the rate that banks borrow from each other. It’s short term money. Mortgage rates are long term loans and so they may be affected by the changes but not always. The Fed also announced that they are buying at least $700 billion in bonds – including mortgage backed securities. That should help interest rates – but not at this time.
The biggest issue facing mortgage rates right now is simply demand. There are too many mortgage applications and not enough liquidity in the secondary market that buys mortgage backed securities. Right now many investors are actually raising rates to slow down the incoming volume of mortgage applications. Two weeks ago interest rates dropped quickly, the number of new applications was incredible. Within days, interest rates increased simply to slow down the volume. Since then the market has been extremely volatile. We have seen price changes 2 -3 times a day – usually up. Wednesday the market changed drastically and most lenders repriced at least 3 times – worse each time.
The unknown in a lot of this is the Coronavirus. People are worried about their jobs, not sure how long this will last and how it will affect them.
So what to do if you want to refinance? You need to talk to your loan officer, have everything ready to go and if you see a rate that makes sense for you -lock. But based on the current market, you need to be ready to move quickly.
So what to do if you are buying a home? It’s a great time to buy!! Interest rates are low – they should stay that way for a while! Just like refinancing, keep in touch with your lender, be ready to go and lock as soon as you see a rate that you like. Understand that we never know exactly what will happen but many experts think rates will drop back to the low 3’s again -it’s just a matter of when. It doesn’t happen overnight but once lenders work through the files they currently have, maybe we will see rates drop again! Remember this is not the same market as we had in 2008 – mortgages are different, they aren’t the negative amortization loans and interest only loans we had back then – not to mention the no income verification loans!
Remember a mortgage is there for a long time – you never know how low rates will go until they have gone up. Right now, the market is up and down and so you just need to try and catch it at the right time.
Leslie Vanderwerf, NMLS ID#335509, AMEC Home Loans, An Equal Housing Lender, NMLS#150953 – Email – Website
