Primemax Mortgage Group

Lower Rates and the Coronavirus

March 15th, 2020 10:48 PM by Regina Rickles, NMLS# 222362

NO Mortgage rates are Not 0-25%!  The Fed Reserve cut its benchmark interest rate to zero on Sunday, the second such emergency rate cut this year in response to the coronavirus.  The Fed funds rate is indirectly tied to mortgage rates, it’s a good possibility that mortgage rates may fall even more in the days and weeks to come as investors flee to safe-haven asset classes, like the 10-year Treasury note, which typically moves with mortgage rates.  However this is not necessarily so.  The mortgage industry as a whole right now choose to raise the rates last week to slow the industry who is lacking in manpower to handle the volume of refinances and new home loans.  

On Wednesday, the Mortgage Bankers Association announced its figures for mortgage applications during the week ending March 6. And it said applications for new loans jumped by 55.4% from one week earlier. Those for refinances increased 79%. Both were at their highest levels since April 2009. 

“So some lenders simply lack the skilled professionals to process all the applications they’re receiving. On Monday, senior originator Ted Rood told Mortgage News Daily, ” … some lenders are not accepting new loans or locks, and lock pricing engines are crashing repeatedly due to excessive volume.”  

“The coronavirus outbreak has harmed communities and disrupted economic activity in many countries, including the United States,” the Fed said in a statement as it cut interest rates to near-zero and launched a $700 billion quantitative easing program to shelter the economy from the effects of the virus.   

We will not fully know the impact of this until the markets open tomorrow and more reports are released this week.  

My suggestion is that you lock if you’re less than 30 days from closing. Yes, you’d have made losses if you’d taken that advice a couple of weeks ago.  But we’re looking at a personal judgment on a risk assessment here: Do the dangers outweigh the possible rewards? So far, this week is making our recommendation look prescient.

However, none of this means we expect you to lock on days when mortgage rates are actively falling. That advice is intended for more normal times.  This is NOT normal times!!  

Posted by Regina Rickles, NMLS# 222362 on March 15th, 2020 10:48 PM

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Primemax Mortgage Group, NMLS#195523

311 West Grand Ave
Rainbow City, AL 35906