MORE BREAKING NEWS! PLEASE READ & UNDERSTAND!
THE INTEREST RATE FOR MORTGAGES IS NOT DOWN TO “0%” PLEASE READ BELOW! PLEASE SHARE
FED RATE CUT AND WHAT IT MEANS TO YOU
With concerns surrounding the stability of both domestic and global markets, the United States Federal Reserve held an emergency meeting Sunday to combat the economic impact from the COVID-19 global pandemic.
The result of the meeting was the announcement of major policy shifts that will try to sway much of the fear and volatility that has driven recent economic sentiment.
What Did the Fed Announce?
In the weeks leading up to the announcement, mortgage rates had fallen to record lows causing a surge of refinance applications. However, the abundance of applications overwhelmed mortgage lenders and caused investors in mortgage-backed securities to slow. This caused mortgage rates to marginally move back up prior to the announcement.
Additionally, the Fed cut the federal funds rate to 0% – the interest rate that banks charge other banks for lending from their excess reserve. It’s important to highlight that this does not mean mortgage rates have dropped to 0%. Though the federal funds rate is one of the most important interest rates that dictate the market, it does not necessarily mean that it will impact mortgage rates.
This is part of a new $700 billion round of quantitative easing the United States central bank is taking in response to the global COVID-19 coronavirus crisis.
We know – it’s not easy. Unless you’re a bond investor, the intricacies of quantitative easing are the least of your worries. The moral of the story here is to know that investors in bond markets affect mortgage rates, and quantitative easing is a method the central bank uses to try and push those investors one way or another to help influence mortgage rates.
Does this Affect Mortgage Rates?
The Fed’s announcement regarding the federal funds rate impacts short-term interest rates and does not directly impact mortgage rates. Mortgages are long-term loans and their rates are tied to long-term bond yields.
What Should You Do?
The Fed’s emergency policy changes have opened the door to homebuyers needing motivation to purchase a home, homeowners looking to save on their monthly payment by refinancing or use the equity they’ve built in their home.
FOR NOW “BE STILL!” UNLESS YOU CAN GET A RATE YOU CAN LIVE WITH, JUST KNOW FOR NOW THE MORTGAGE INTEREST RATE “WENT UP!”