A lot has changed in the past two weeks, by the hour. It seems every day the gov’t on the local and federal level are attacking the COVID-19 virus and the economic consequences expeditiously. Regardless of the Fed Funds rate being cut to 0-.25% there are multiple dynamics affecting mortgage rates simultaneously. There can be several mortgage rate changes a day. The swings can be substantial.
Pushing rates down:
The Treasury is buying $700B in bonds and mortgage backed securities. An expansion of the Quantitative Easing,
Economic activity has hit a wall, potentially bringing on a domestic and global recession
Pushing them up:
It’s supply and demand working on multiple levels…
Lenders are running at capacity and their turn times are longer. Many are keeping rates higher to curtail an over abundance of loans they’re having a hard time getting through their system (some can move a higher quantity than others)
The over $1 Trillion in stimulus that the government will use to fight the economic slowdown, will have to be borrowed and the bonds will be in competition for capital that could be used to purchase mortgage backed securities. (note foreign central banks are also borrowing money to stimulate their domestic economies… throwing the kitchen sink at it)
Right now, the supply of bonds is winning the battle and driving rates up. Depending on how long the virus crisis goes on for, and how bad the global economy is damaged, expect the rates to drop.
Lenders are prioritizing underwriting loans based on if it’s a purchase loan or refinance, locked or floating. Even though the rates jumped, and there’s tremendous volatility, it would be smart to get your documentation together and get in pipeline, if interested in locking a loan when it drops into a lower range.
Another issue is getting a loan through underwriting and funded if a verification of employment and income is hard to verify while business is disrupted because of the virus. But that’s another blog…
It’s a great time being a broker with a lot of lending choices. It’s not just a matter of getting the best rate, it’s also a matter of execution. Don’t shop by rate only, or you can be burned.
If you are in the Los Angeles area, have any questions or real estate sales or financing needs, feel free in contacting me
Ron Henderson GRI, RECS, CIAS
President/Broker
Multi Real Estate Services, Inc.
Gov’t Affairs Chair – California Association of Mortgage Professionals (2017-2018)
Chairman – OutWest Marketing Meeting (Real Estate Education)
BRE #00905793 NMLS #310358
www.mres.com
ronh@mres.com
Specialist in the Art of Real Estate Sales and Finance
Real Estate market, mortgage rates, Los Angeles, San Fernando Valley, Conejo Valley, Simi Valley, Woodland Hills, West Hills, Calabasas, Chatsworth
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