As news surrounding COVID-19 continues to evolve on a daily basis, The Federal Reserve announced it was dropping federal fund rates between 0% – 0.25% to help boost the economy.
What does that mean for you?
At the moment, those rates impact things like credit cards, savings accounts and emergency bank lending rates, but it does not mean mortgage rates are falling to zero. That’s because mortgage rates are different from federal fund rates, as they’re tied to long-term bond rates.
While the fed funds rate does not directly correlate to 15 & 30 year fixed rates, mortgage rates will typically trend directionally with the Fed Funds rates. For instance, mortgage interest rates are currently sitting at 50-year lows after a rate drop last week. This has caused many current homeowners to look into refinancing and has given potential home buyers an added incentive to buy.
Here’s more information on the Fed’s moves over the weekend meant to help stabilize the economy:
- Lowered federal fund rate targets to 0% – .25%
- Announced a new round of quantitative easing (QE), with purchases of $500 billion of treasuries and $200 billion of mortgage-backed securities, starting today.
- Emergency lending at the discount window for banks will have rates of .25% with lengthened terms to 90 days.
We will continue to keep you updated on important developments regarding federal fund rates and mortgage rates during this volatile time. If you have any questions about your mortgage or whether now is the right time to buy a home or refinance, please contact a local PrimeLending loan officer.