Yun: Fed’s Rate Cut to Zero Is ‘the Right Policy’

The Federal Reserve called an emergency meeting Sunday to slash its benchmark rate to zero—its second response to the volatile economic reaction to the coronavirus outbreak. The Fed also said it would buy $700 billion in Treasury and mortgage bonds. After the Fed’s last emergency cut on March 3, mortgage rates plunged to all-time lows. Freddie Mac reported the 30-year fixed-rate mortgage averaged 3.29% for the week ending March 5. Could rates go even lower with the Fed’s latest emergency cut? Not necessarily, economists say.
The Fed’s benchmark rate is not directly tied to mortgage rates, although it often influences them. Mortgage rates are more directly tied to the 10-year Treasury note, which was pushed to a series of recent lows earlier this month but has climbed higher over the past week. Economists caution that mortgage rates don’t always respond in unison to the Fed’s rate adjustment. Further, lender backlogs are keeping rates from going lower. Because banks are handling more loan requests than they can handle, the financial institutions are charging some borrowers more. This trend will ease overtime as the backlog is worked off and lenders staff up or figure out how to do more work remotely.
Continue…https://magazine.realtor/daily-news/2020/03/16/yun-fed-s-rate-cut-to-zero-is-the-right-policy