Fed Rates vs Mortgage Rates

According the the Federal Reserve, “The relationship between the Fed’s monetary policy and long-term rates is weak and variable.”

On Sunday, March 15th The Federal Reserve announced a cut in benchmark interest rates by a full percent to zero. That’s right, zero percent. They also announced the central bank would buy no less than $700 billion in government and mortgage-related bonds in the coming months, all in an effort to “support the flow of credit to households and businesses [during this time of] anticipated hardship caused by the disruption to the economy.” The primary disruption being the coronavirus outbreak.

The last time the Federal Reserve took such a bold step was back in 2008 during the housing crises.

Many are wondering if Sunday’s announcement will effect long-term rates like the 30-year mortgage. There are a lot of pieces to this puzzle, but it’s important to know that Fed Rates are quite different from long-term mortgage rates. The Federal Reserve has some influence over short-term interest rates for loans with a maturity of less than a year, like money market rates and Treasury bills. Yet according to the Fed, “The relationship between the Fed’s monetary policy and long-term rates is weak and variable.”

In other words, Sunday’s announcement will likely not have an immediate or direct impact on long-term mortgage rates.

However, it is possible that these more recent measures, most importantly the purchase of government and mortgage-related bonds, could create a chain of events that indirectly impact mortgage rates. Only time will tell. We’re keeping a close eye on these events and how they effect mortgage rates so you can rely on us to provide the best mortgage lending rates and options.

Intercap Lending is committed to keeping you informed of mortgage lending programs, rates, and opportunities for residential purchases and refinance. As a direct Fannie Mae, Freddie Mac, and Ginnie Mae lender, we have the unique ability to underwrite most of our loans in house, saving our customers time and money. Please contact your Intercap loan officer for current rates and mortgage lending options.

Since mortgage rates could very well drop sometime soon, the best step to take is to get your refi or purchase application in now so your loan officer can lock you in when the rate drops.