Many are wondering what is happening with mortgage interest rates in this wild market and unprecedented times. We asked one of our recommended lenders, Molly Kincaid with Partners United, to share with us her two-cents on the situation!

From Molly:

Markets are still moving rapidly and in unpredictable ways. While the Fed dropped their lending rate, it has not lowered interest rates for mortgages as mortgage rates do not follow the Fed rate. This is a very common misconception in our industry, and a conversation that I have had numerous times daily through this week.

To help clarify in a fun little nutshell, here we go! 😊

The Fed lending rate, or prime rate is the interest that the Fed charges banks (not consumers) for very short term financing. Mortgage rates are tied to the bond market, so they generally (but not always) move with the 10-year treasury, which has been jumping all over the board through the last 2-3 weeks. This has made predicting the rate market incredibly difficult, if not impossible.
While the Fed rate does not always influence mortgage rates (let’s be clear, it SOMETIMES does), the proposed quantitative easing package most certainly will. More specifically the part where the Fed plans to purchase a chunk of mortgage backed securities. These guys (MBS) are mortgage rate super stars and will most certainly have influence on their direction, so once these purchases happen we will see rates move, and the usual movement is in the downward direction. In this crazy market it’s so hard to say anything for sure, but lets just say we expect them to go down!
In addition to these normal rate influencers, lending institutions experienced a massive wave of new refinance loan applications when rates hit the floor a couple weeks ago. This has caused unprecedented liquidity issues for investors, and lending institutions are also struggling to carry this volume through processing and underwriting.

It is with these powers combined that we are seeing rates move in leaps and bounds like never before! They were relatively low again Tuesday morning, but took a swift turn in the upward direction in the afternoon and have since powered up to a head-shaking high. My lending colleagues and I are all watching like hawks as pricing updates come in numerous times a day.

We are expecting to see them drop again, but it might not be as quickly as we originally thought. We are now looking more towards 2-6 weeks, but are certainly ready to pounce should the market continue to surprise us. We are ready for anything, and are here to help answer your questions!! I know this can be a bit confusing, it is even confusing (right now particularly) for those of us that do it every day! Please don’t ever hesitate to reach out with questions. I’m always happy to hear from you, and always happy to help. 😊

One of the best things you can do if you are a buyer is, get your loan application in so you can take advantage of the lower rates. If you wait to apply when the rates are low, you may miss the opportunity to lock the low rate. In this ever-changing market, it is better to be prepared and ready to lock to secure a great rate!

Stay clean and safe out there friends!!

Molly