What is quantitative easing and how does this affect mortgage rates?

What is quantitative easing and how does this affect mortgage rates?

First of all, I hope that you’re all safe and healthy, and being smart out there as we work through this pandemic. Today I want to address what is quantitative easing? You may have seen it in the news, that the Fed announced that they’re going to do unlimited quantitative easing, whatever that means. Well, I wanted to explain that means.

This is the same thing as what they did in 2008 after the housing crisis to help prop up the economy. Basically what this is, is the fed buying bonds. These bonds are in the form of mortgage-backed securities, for example the 10-year treasury.

What this does, it helps support that market. So how does this translates into mortgage rates specifically?

This is the part that I want to talk about, usually this causes mortgage rates to improve. We have actually seen that in the market regarding mortgage-backed securities. Mortgage rates, have improved a little bit but not as much as I expected, based on what bonds have been doing or what the mortgage-backed securities have been doing. Part of this is because the mortgage industry is still struggling with capacity issues… we just not having enough people to handle the amount of demand.

There’s so many people refinancing right now, or interested in refinancing, and there’s only so many people available to handle the volume on refinances.  My advice, if you haven’t already taken advantage of low rates, is to get your application in with your lender so that they can be prepared to take advantage of it when rates fall. Obviously there are no guarantees, of course, but it seems likely that rates could go down in the coming weeks at some point. We don’t know when, but it’d be wise to be ready to lock in a lower interest rate when the opportunity presents itself.

Also, this is a great opportunity to consolidate debt, to pay off your car loan and get rid of that payment, get rid of student loans or whatever it is, to help lower your monthly obligations to get through this difficult time. I would suggest taking a look at your situation to see how a refinance could benefit you and get prepped to lock when rates come down, because it could be a short window again. If there’s a flood of thousands and thousands, hundreds of thousands of applications nationwide, rates could jump right back up within short order, in 24 to 48 hours after they dip down. So very wise to be prepared to take advantage of this when the opportunity arises.

So just give me a call if there’s anything I can do for you, any questions that you have. 303-670-0137 or email us at baxterteam@fairwaymc.com