Talk Irvine

General => Real Estate => General Real Estate and Mortgage Talk => Topic started by: nguyener on September 12, 2019, 08:38:00 AM

Title: What would a negative Fed rate mean for mortgage rates?
Post by: nguyener on September 12, 2019, 08:38:00 AM
The Fed isn’t going to cut rates to zero, or go negative, at its September 17-18, 2019 meeting. However, there is an 89% chance of a 0.25% cut, according to the CME Group FedWatch tool.

That gets the most powerful financial body in the world, the Federal Reserve, closer to the zero-or-negative rate that Trump wants.

The relevant question for mortgage shoppers is, “What would a 0% Fed rate do to mortgage rates?”

The Fed rate doesn’t directly change consumer mortgage rates. However, its actions influence them.

The last time the Fed cut rates to near-zero levels was during the last recession. The result was lowest-ever mortgage rates for consumers.

The 30-year fixed-rate settled in the low 3s.

But rates could go even lower this time. Fixed mortgage rates are already in the mid-3s, according to Freddie Mac data. They could feasibly get sliced in half if the Fed reduces its federal funds rate to 0% or even -0.25%. (Germany’s bonds hit a record low of -0.31% in mid-August).

So sub-2% mortgage rates are not outside the realm of possibility. If you could get a 30-year fixed mortgage at 1.75%, would you refinance? No doubt that most of us would.

A Danish bank is already issuing 10-year fixed loans at -0.50% (yes, that’s a negative number). So any artificial “floor” under which mortgage rates “can’t drop” is more like a shadow.

If you’re in the market for a refinance or to buy a primary home, investment property, second home, or other property, 2019 and 2020 could be your once-per-lifetime opportunity.

Tony Nguyen  | NMLS#93776
Vision Quest Lending  | 2860 Michelle Drive, Suite 140, Irvine, CA 92606
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