Fed Funds Rate and Mortgage Rates

It is our goal to educate our clients and advise them on the best options for home loans. The purpose of this post is to clear up confusion on volatility of financial markets and their affect on mortgage rates.

Since the Coronavirus has spread globally, mortgage rates have become extremely volatile. It is true that they dropped to historic lows for a very short period (days). Directly following this, mortgage rates shot up to the levels we started with in 2020.  

Mortgage rates are still low, historically speaking, however some of the rates in the media or on Social Media are misleading and are not available for any bank or lender.

The Federal Reserve Dropped the Feds Funds Rates

Today, March 15th, 2020, the Federal Reserve had an emergency meeting to announce a stimulus package to help calm the economy. They announced that they would reduce the Federal Funds Rate to near Zero.

The Fed Funds Rate is the overnight rate that banks can borrow money. Since the Feds only have 8 meetings per year, they are simply adjusting to catch up to the Coronavirus aftermath. Mortgage backed securities determine mortgage rates and adjust multiple times a day. This means the pricing has already been adjusted based on current market conditions.

It is important to understand that the Fed Fund Rate is not Mortgage rates. Over the upcoming months, this drop may help to bring mortgage rates back down from their recent highs, however this does not mean that mortgage rates have dropped.

What should we do Regarding our Mortgage?

Our advice is to speak with your mortgage broker to review your mortgage on a regular basis. We will help to review potential savings and advise on mortgage options. We plan to put out regular updates and reach out to our clients individually if we see opportunities to help save you money.

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