Mortgage rates get much-needed help from Fed
Mortgage rates plummeted Wednesday after suffering painful increases late last week.
The reason: a very encouraging message from the Federal Reserve, at least as far as interest rates go.
The group said it would keep its benchmark rate — the federal funds rate — near zero through 2022.
That’s two and a half more years of a low-rate environment in which super low mortgage rates might also linger.
If you’re not in a hurry to buy or refinance, this is very good news for you.Find and lock a low rate. Start here (Jul 5th, 2020)
Fed agrees: Rates aren’t rising any time soon
Admittedly, the reasons for the current low rate environment are nothing to cheer about.
The Fed’s interest rate policy is based on wildly uncertain economic times for the foreseeable future.
Coronavirus has ravaged the U.S. economy and led to record-high unemployment. Worldwide, things aren’t much better.
The silver lining, though, is a Fed that unanimously favors a fed funds rate near 0%. The Fed doesn’t control mortgage rates, but the group sure can help them stay low.
In a rare show of solidarity, every single Fed member predicted low rates through 2021, with only two dissenters saying rates would rise in 2022. Each dot in the below image represents a Federal Reserve member, hence this chart’s nickname, the “dot plot.”
Typically, these dots are somewhat spread apart: some Fed predict or even argue for a higher Fed rate in the future.
But this chart shows a rare, nearly across-the-board agreement that rates should stay low for some time.
Your next move as a mortgage shopper
As mentioned, mortgage rates don’t follow the federal funds rate perfectly. Mortgages could get more expensive even as the Fed uses its full power to keep all rates low.
With that argument, those seeking to purchase a home or refinance shouldn’t wait. Rates are near 50-year lows right now, and it will be hard for them to go lower.
But if you’re in the market to buy or refi in coming years, be encouraged.
Many people are working to raise their credit score, advance their career, or set a budget. In these cases, they can likely breathe a sigh of relief. Low rates will probably be a round in a year or two when they are ready.
No matter what your home finance timeline, today’s meeting of the Federal Reserve should brighten your day.
It appears mortgage rates will continue their record-breaking streak.Verify your new rate (Jul 5th, 2020)