Mortgage rates dropped quickly today. This wasn’t necessarily destined to be the case this morning, but after the Fed released its most recent policy announcement, mortgage-backed bonds improved significantly, thus allowing lenders to offer lower mortgage rates via mid-day price changes.
Bonds loved what the Fed had to say because the announcement unequivocally committed to ongoing bond purchases in amounts equal to what we’ve seen in recent weeks. In a nutshell, the Fed will continue to be the single biggest buyer of new mortgage debt. When demand for that debt is strong, mortgage bond prices move higher. When prices move higher, rates move lower.
Today’s mortgage rate move is NOT related to the Fed forecasting near-zero rates through 2022. Those forecasts pertain to the Fed Funds Rate which applies only to overnight transactions between banks. Mortgage rates are nowhere near 0%. That said, they are right in line with the all-time lows seen on June 1st and May 21st. A few lenders are slightly better, actually.
For the average lender, this means the ability to offer ideal borrowers in ideal scenarios conventional 30yr fixed rates of 2.875-3.125% , with the average lender erasing a good amount of the weakness seen last week.
Loan Originator Perspective
The Federal Reserve came through today for mortgage rates. We saw big improvements following the update in their language. Locking in as soon as you see your lenders reprice would be prudent as we are near the best levels. –Gus Floropoulos, VP, The Federal Savings Bank
Bonds were already rallying this week, but today’s Fed Statement further boosted our gains. Rates are at/headed to all time lows, and if Fed rhetoric is any indication, should remain low for a while. I’m refinancing folks I never expected to, who already had rates in the 3’s. Whether you lock or float, it’s time to get going on a loan! –Ted Rood, Senior Originator, Bayshore Mortgage