Here’s what you need to know about the Fed Funds Rate cut, quantitative easing, and nailing a refinance in these volatile times.
The Federal Reserve has cut rates two separate times to a target range of zero to a quarter of a percent. While this is a positive measure that helps alleviate some of the economic turmoil that’s happening right now, it’s important to keep in mind that the slash doesn’t directly affect mortgage rates.
That being said, mortgageswillbe impacted by the fact that they’ve started quantitative easing once again, specifically with the purchase of $200 billion worth—that’s “billion” with a “B,” folks—of mortgage-backed securities markets. Over time, this will drive interest rates down.
The fact remains that the mortgage industry as a whole has a capacity issue; while the average year has about $2 trillion worth of originations (half stemming from purchases, the other half from refinances), there’s currently trillions of dollars’ worth of loans out there that could benefit from a refinance and the industry simply doesn’t have the capacity to refinance half of America in a two- to three-month window.
As such, lenders will have to hold their rates higher than they’d otherwise have to in order to maintain a certain level of volume flow. Once they chip away at that big initial wave of business, they’ll then be able to lower rates to capture more business. This means it could take a bit of time to get back to where we were in early March, when rates hit their all-time lows, but your patience will be rewarded.
If you’re considering refinancing, get your ducks in a row. Get a proposal completed now so you can see just how beneficial a refinance would be for you at current rates, then we can create a game plan to pull the trigger on a rate lock when they drop. Everyone in the country will be wanting to do the same thing, so if you don’t prepare ahead of time, you’ll miss out on this opportunity.
Many people already missed out, thinking that rates would stay low throughout the first part of 2020. They don’t stay the same, and they’re especially volatile right now—up sharply one day, then down the next.
Head to mortgageplanningquestionnaire.com, complete the questionnaire as thoroughly as you can, and with that information, I’ll be able to create a proposal that we can discuss together. I’m aiming to help a lot of families this year, as interest rates will provide us with an opportunity to build wealth for so many.
If you have any questions about this topic, please feel free to reach out to me by phone or email. I’m more than happy to assist you in these somewhat confusing times.