What does this mean for my mortgage?
I am getting a flood of texts, emails, and voicemails. Although the Fed lowered the PRIME RATE, they did not just drop mortgage rates to 0%.
Short-term debts are based on prime; auto loans, credit cards, HELOCs, and other short-term debt.
Mortgage rates are based on mortgage backed securities. The swing of rates from last Friday to this Friday was 0.75% or more… for the worse!
They dropped like a rock,… and then shot up like a rocket.
The banks are pumping the brakes on falling mortgage rates, pulling back hard and fast from the historic lows we saw last week.
Banks are at capacity! The banks were absolutely flooded with refinancing in the last week. They are wary of meeting the time frames to complete all of these transactions. In addition they are concerned that sick calls could deplete their staffing.
Banks are businesses that want to make money. They are not motivated to lend out mortgage notes for 30 years at ridiculously low rates. They don’t want to be stuck with these loans on their books for 30 years and not have any money to close future business at higher rates.
Right now all the banks have plenty of work. As they move through their in-box they will eventually look to attract new work by competing over low rates again.
Look for this to happen about the same time things stop getting canceled, toilet paper returns to the shelves, and virus fears start to subside.
We are in unprecedented times for sure.
