I posted one week ago on March 8th that during the previous week we’d seen some of the lowest mortgage rates in my entire 15 years in the industry. Since that post the concerns around the Coronavirus have skyrocketed, the stock market had some huge drops and the yield on treasuries is hovering well below where it was for the past several months. While the metrics should be good for lower mortgage rates, they started going up on the 9th and haven’t stopped since.

It’s a very unusual situation with rates acting the reverse of what they would typically do. So what’s the reason for that??
From everything I’ve been able to research about the subject it appears that lending institutions have intentionally pushed rates higher to slow up the huge influx of refinance requests they had during the week between 2/27 and 3/8. They are also mitigating the losses that they will have on those mortgages that are already at good rates in the upper 3’s made in the past couple years that are being refinanced into lower rates. That really appears to be the primary driver behind interest rates going up while all the data points and metrics say they should be staying as low as they hit recently.

I’ve been asked by friends and clients if I expect rates to go back down and honestly it’s been a really difficult question to answer as the things I would look at as indicators are not affecting things in a typical fashion. I mentioned in previous posts that the Coronavirus fears could drive rates lower and while that was certainly the case during the first week of March it appears that even though those continue to grow they aren’t pushing rates down.

We have entered a time of extreme volatility in the stock market and that has had the effect of making mortgages seem like a place of safety for investors to be holding. What attracts investors besides security? Good rates of return. I think these lending institutions realize that they are going to have buyers for mortgage backed securities and can bump the rates up to gain more profits in this volatile market.

If the stock market and Coronavirus fear isn’t going to help with rates what else could? FED ACTION! As I was writing up this post it came across the wire that the Federal Reserve is taking some huge action now in advance of the meeting they already had scheduled this week.
1. The Fed is cutting the Fed Funds Rate to ZERO
2. The Fed will start buying $500 billion in treasuries
3. The Fed will start buying $250 billion in mortgage backed securities

While the first one in that list will get most of the headlines it’s not the one that impacts mortgage rates the most. The Fed Funds Rate is the rate at which banks lend to other banks typically on an overnight basis and isn’t tied to mortgage rates. Now the 2nd and 3rd items do both impact mortgages and the rates available on those. This program of the Fed buying those two products is called Quantitative Easing and was used in the post 2008 era to help propel the market forward with people having access to low rate mortgages. The Fed is being pro-active around the Coronavirus impact and the likelihood of falling into a recession by instituting this again and hopefully keeping both the stock market, mortgage lending industry and real estate market from faltering.

Will the Fed’s action help push mortgage rates back down to the levels we saw the first week in March? Or will lending institutions continue to offer rates that don’t seem to correspond with what we should see? That’s hard to know on this Sunday evening but I expect we’ll have an idea on Monday morning when lender rates become available. What happens during the upcoming week is going to have a large impact on all areas of the financial markets, mortgage rates and life in general in our country.

If have several clients of mine, sitting at the ready, waiting for the low rates to pop again, and there's a technique for this pursuit. I’m encouraging everyone to have a loan application setup with me, submitted at at least one lending source and waiting for the right moment to lock in. With how volatile of a market we’ve had lately that’s the best approach at this time. I’m happy to set that up for anyone who’s interested in the opportunities that may present themselves for a refinance into a rate near some of these all time low figures.