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Coronavirus impacting home loan rates
Real estate expert John Adams talks about how the coronavirus outbreak is impacting home loan rates.
ATLANTA - The Coronavirus pandemic has already caused major changes in the lives of most Americans, but one unexpected result of the virus is that home loan rates have fallen to new lows. Does this create an opportunity for you? Real estate expert John Adams breaks it all down.
Here are key takeaways:
- The Fed lowering rates doesn't necessarily equate to lower mortgage rates - although I believe it likely will. We will know more in the coming weeks.
- The Fed is taking aggressive (and I believe appropriate) steps to ensure economic stability in uncertain times.
- The US Housing Market is a major driving force in the economy that the Federal Reserve will support.
Due to a serious decline in the stock market, investors are in a panic. It’s called a flight to safety, which means shifting their investments from the stock market to government bonds.
All that extra cash drives down rates, and recent low interest rates have resulted in a surge of loan applications. In an effort to slow down demand, lenders have been forced to raise rates just enough to let them try to get caught up, at least for now.
Today, you will find that advertised mortgage rates are higher than expected right now. As I mentioned, the surge in applications has exceeded lenders’ capacity levels and therefore pushed rates upward.
Rates today are approximately:
- 30 year fixed 3.5%
- 15 year fixed 2.75%
- 5/1 ARM 2.75%
Once lenders get reasonably caught up, I fully expect them to lower rates to attract more business. But exactly when this will happen, no one knows.
My advice is to go ahead and get pre-qualified with more than one major lender, and be ready to pull the trigger on a home loan quickly when the rates drop.
Given the recent cut in the fed funds rate, I believe we could easily see 30 year rates in the 2.75% category, which would be close to an all-time low. This is especially enticing for anyone thinking about refinancing as well.
THE BOTTOM LINE: Never try to time the interest rate market - it’s simply impossible to know in advance what’s going to happen. That being said, I believe that there is a real chance that lenders will be forced to lower rates in response to falling demand, probably in the next few weeks. Smart borrowers will be prepared to jump on a great rate as soon as (and if) they find it.