What FED RATE CUTS mean for buyers and borrowers

This past weekend, the Federal Reserve called an emergency meeting and slashed its benchmark rates to zero in an effort to bolster the coronavirus-compromised U.S. economy. During the same meeting, the Fed predicted it would buy $700 billion in U.S. Treasury and mortgage bonds, and many real estate professionals and homeowners responded with elation, expecting interest rates to quickly plunge to zero.

Unfortunately for anyone hoping to have a negative interest rate on their mortgage, although Fed policy does affect mortgage rates, it does not define them. Mortgage rates are often influenced by 10-year Treasury notes, however, which actually climbed last week. Of course, this is not a guaranteed guide to mortgage rates either, so it remains to be seen what mortgage rates will do in the coming weeks and months[1].

At time of publication, a conventional 30-year fixed-rate mortgage was hovering around 3.625, historically low by any standard. 15-year fixed-rate mortgages were hovering around 4.5 percent. However, analysts warn that a backlog of mortgage applications and the increased costs associated with originating loans at this time when most businesses are trying to keep employees out of the office. Ultimately, interest rates will likely rise or fall based on many factors in today’s market and possibly in more distant relation than usual to the “conventional” factors of Fed rates and Treasury yields.

Are you expecting interest rates to fall farther?

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[1] https://magazine.realtor/daily-news/2020/03/16/yun-fed-s-rate-cut-to-zero-is-the-right-policy

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