Questions That You May Have About the Interest Rates
With the current economic conditions and the crisis surrounding the coronavirus, interest rates may not be much of a concern to you right now. However, the short- and long-term future of the interest rates is something that you’ll need to think about if you’ve been planning on buying a home or refinancing your mortgage.
Here are four questions that many mortgage and real estate professionals have been getting recently about the interest rates:
1. Will the Federal Reserve’s recent rate cut help interest rates? The Fed’s emergency rate cut—lowering the federal funds rate to a target range between 0-0.25 percent—was designed to contain the economic fallout from the coronavirus crisis. It should also be noted that the federal funds rate does not directly affect mortgage interest rates. That being said, the Fed’s announcement that it will buy “unlimited amounts” of mortgage-backed bonds may help to stabilize and lower mortgage rates going forward.
2. How much will the current economic conditions affect the rates? As a general rule of thumb, mortgage interest rates do tend to follow overall market trends and current economic condition (both global and U.S. economic conditions). Due to the fear surrounding the spread of the coronavirus, global and domestic markets are down across the board and Treasury bond yields are the lowest they've ever been—which in turn has been causing mortgage interest rates to decline, although they have ticked up slightly lately.
3. Will the interest rates drop to zero percent? Although the possibility of a zero-percent interest rate environment is something that the media and others like to ponder, the reality is that it’s highly unlikely that the rates will fall to zero percent. Almost every expert agrees on this point. Greg McBride, chief financial analyst at Bankrate, puts it this way: “Even the government can't borrow at zero percent. The most creditworthy consumer carries a higher risk than the U.S. Treasury, so you are going to pay at least a couple percentage points more than that.”
4. Once we get past the coronavirus crisis, will rates go back up? Getting past the coronavirus itself is only half the battle. The other half is stabilizing the U.S. and global economies. How this will happen and how long it could take remains to be seen, so the long-term future of interest rates is certainly up in the air at this point. However, most experts believe that mortgage interest rates will be low at least in the short term.
Please keep in mind that economic conditions and the situation with the coronavirus are very fluid right now and are changing on a daily basis. To get the most up-to-date information, contact your mortgage professional.
For more than 25 years, Omega Financial has been serving mortgage clients in Massachusetts. Our brokers have approximately 50 years in the mortgage business. You always will receive fast, courteous, and accurate information. Omega Financial, Inc. is a company duly licensed to operate in Massachusetts as a Mortgage Brokerage. We are located in the Town of Norwood, Massachusetts where we have been operating as Omega Financial Incorporated since 1988.
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