October 26, 2020

Mortgage rates likely to fall again after the Fed’s latest dramatic response to coronavirus

Mortgage rates are primed to fall again after the Federal Reserve’s latest dramatic policy moves to combat the economic impact from the deadly coronavirus pandemic.

The Fed on Sunday said it will begin buying $200 billion of mortgage-backed bonds, a move that will stabilize and likely lower mortgage rates, which moved sharply higher last week. This is part of a brand new, $700 billion round of quantitative easing in response to the COVID-19 crisis. The central bank also slashed rates to zero.

Mortgage rates had fallen to a record low two weeks ago, but a flood of refinance applications overwhelmed lenders and caused investors in mortgage-backed bonds to back off. That, in turn, caused mortgage rates to jump more than 50 basis points in one day and hit their January high by the end of last week. The Fed’s move will likely reverse that course yet again.

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