Lender Market Update

From our Lending Partner, Jorah Price at Guild Mortgage:

For the last few weeks mortgage interest rates have been volatile. However, the Federal Reserve recently began an aggressive policy of purchasing mortgage backed securities by as much as $50 Billion per day.  This action has injected liquidity into the bond markets that establish pricing and yields for mortgage backed securities. Mortgage rate yields began to subside from their short-lived but lofty levels on March 20th when the Federal Reserve took action. 

As a result, interest rates for those purchasing a home have improved close to their range pre-COVID-19.  Rates for refinancing are not back to those same levels because lenders are heavily subsidizing rates to those who are buying homes. We expect to continue to see volatility with mortgage rates (as with all asset classes). 

A stable environment for both the economy and interest rates will come over time. The passing of the stimulus package, the intervention by the Fed, and the assumption of additional stimulus money and/or additional Fed intervention will help with this. While no one has an idea of where rates will be longer term, we no longer see a decline in interest rates from the lows we saw earlier this year. 

It's possible we may see lower rates than current, but the cost of the stimulus bill and the increase of the Fed’s balance sheet will eventually have to be paid for with the issuance of more debt by the government.  Over time that will eventually put more supply onto the market and ultimately put upward pressure on yields.