This week the Federal Reserve board had an emergency meeting and cut rates by .50%! At the end of 2019, the Fed announced that they wouldn’t touch interest rates in 2020. Then the coronavirus spread, the stock market plummeted and the Fed held their emergency meeting. This was the first emergency meeting since the financial crisis in 2008. Normally the Fed changes rates by .25% (up or down), this time they doubled it to .50%.
Current mortgage rates are basically at all time lows – or close to it! For those that are looking to buy, it’s a fantastic time! For those that bought in 2017-2018, it’s a great time to look at refinancing and maybe eliminating mortgage insurance if you still have it. Rates are in the low 3’s depending on your situation. Check with your loan officer to see where you are at.
So what is going on? The Fed doesn’t set mortgage rates, they set the rates that banks use to borrow at. So why are mortgage rates dropping? When the stock market is in a turmoil like it is now, investors tend to pull money from the stock market and put it in mortgage backed securities. The bond market is more stable and when investors put money into the mortgage backed securities, it will typically lower rates. So how far are rates going to drop? No one truly knows. This may be has low as they go. Maybe we’ll see a little more of a drop but lenders are also pulling back. If you look at refinancing, some banks have increased those rates slightly to slow down new applications. We are seeing new interest rate locks at very high levels and so some banks are backing off. The concern is to have the manpower to actually get these loans closed!
So what to do? Are you looking to buy a new home? Great!! Once you find a home, talk to your loan officer and see where rates are. Yes, you want the lowest rate possible but you also never know that it was the lowest rate until they have increased. So if you are comfortable with the rate, lock it in! Are you looking at refinancing? Same thing – talk to your loan officer, see what the rates are at and decide if it makes sense. If so, lock in the rate and refinance!!
No one knows how long rates will stay this low. I have heard that rates may stay close to this for most of this year, but you never know!! As fast as they dropped, they may go up just as quickly! Just know that rates are fantastic and it’s a great time to buy a home or think about refinancing!!
Leslie Vanderwerf, NMLS ID#335509, AMEC Home Loans, An Equal Housing Lender, NMLS#150953 – Email – Website
