Fed Cuts Rate to 0% - What does that mean??

Fed Funds Rate does NOT equal Mortgage Rates

Today (3/15/2020) the federal reserve announced another rate cut and here’s what that means to YOU...

• Fed cutting rates is a short term overnight bank to bank lending rate which DOES NOT have a direct impact on mortgages.

• This cut will lower rates on short term items like credit cards, home equity loans, auto loans and other consumer loans that are affected by the “prime” rate.

What does this mean for YOU and mortgage rates?

• Could move mortgage rates lower?  Yes, but they could also go higher based on this. If the stock market rallies tomorrow on this news, it could actually cause long term rates (mortgages) to increase.

• Mortgage rates are based on the MBS (mortgage backed securities) market, which is independent from the treasury bond as well as the stock markets but typically reacts within certain tolerances of those financial markets.

See link for FED OMC notice.

That being said, you should also know that the FED announced Quantitative Easing 4! Also know as QE4! 

This should be good for mortgage rates!

What is QE4? It is a financial stimulus package that will hopefully reverse the negative direction of the Stock, Treasury Bond, and Mortgage-Backed Securities (MBS) markets.

These are the main financial moves the FED will make in QE4:

- Fed Funds Rate now 0-0.25% (matches record low)
- $500 Billion in new Treasury Market purchases
- $200 Billion in new Mortgage-Backed Securities purchases (This should help mortgage rates)

In summary ... mortgage rates should hopefully go down. This is great for buyers! And of course, for people that already have a mortgage that they want to refinance and missed the first dip! 

So, people in a position to refinance could get another opportunity if they were not able to lock in a few weeks ago! 

However, they need to be ready to take advantage of it! 

BE INFORMED - Know that interest rates may go down quickly but could jump back up just as fast so don't lollygag.  Get ready now. 

If you, your clients, family, or friends have questions, or would like to see if a refinance might help you or make sense, please feel free to reach out to me. I am happy to help!

Stay Tuned!!