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Mortgage rates have not been reduced to 0%!
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I’ve already received more calls, texts & emails than I can handle in the past few hours. Yes, the fed cut the “fed funds rate” to 0-0.25%. No, mortgage interest rates will not fall to zero and I don’t believe they ever will. Here is a breakdown to help you better understand.

To put it simply, this is the rate at which depository institutions lend reserve balances to other depository institutions overnight, uncollateralized. This will affect the rates of HELOC’s, business loans, auto loans & credit cards but does nothing directly related to mortgage rates. Mortgage rates are not driven by the Fed but are driven by the Mortgage Backed Securities market.

The bigger items that may affect mortgage rates for the better, that most are not talking about, is the fact that the Fed announced, as part of its stimulus plan, that it would be buying $200 billion in Mortgage-backed Bonds (Mortgage Backed Securities) and an additional $500 billion of Treasury’s. On top of that they are eliminating the reserve requirements for banks which could free up trillions of dollars in liquidity for banks to lend. This is a piece that has been driving up rates over the past week or two, when everyone thought they should be lower.

With all this said, I believe rates have the potential to come down. I can’t say if this will be tomorrow, next week or next month. There are too many other factors with the COVID-19 virus & other market factors that are playing out at a rapid pace and are unpredictable.

If you are currently in the market to purchase a home or refinance, stay in close contact with your mortgage professional. I would get your loan application started ASAP, so you are best prepared to take advantage if/when rates do drop! This could unfold fast (for better or worse), as we saw over the last 2 weeks, and you could see swings of around 1% in interest rates in a matter of days! Just 2-3 weeks ago, I was locking loans at the lowest rates I have ever locked in my 20 years in this business. So, at this point it is anybody’s guess if rates will go back down to the rates we were seeing just a short time ago, but this should help lower rates from where they are currently right now. If you can get a lower rate than what you currently have, I would highly suggest you lock in what you can if it makes financial sense. Rates tend to go up a lot faster than they come down. If you locked in at the last dip, consider yourself lucky, as I don’t anticipate much of a change for you.

Timing- With the potential of businesses and government shutdowns or being short staffed because of quarantines, it would not surprise me to see loans taking 30-60 days. Of course, purchases would be prioritized! Lenders all across the country are already operating at max capacity before the potential sickness and quarantines. We at United First Mortgage are well set up to be able to work from anywhere, but slowdowns are a real possibility.

Feel free to reach out to me by DM, email of phone if you have any mortgage related questions at [email protected] or 801-949-5193. I will be happy to answer any questions I can. Thank you for reaching out & Happy Sunday!

Brandon Brady
United First Mortgage
Mortgage Advisor
NMLS #279376