MIAMI – The Federal Reserve’s emergency interest-rate cut and the subsequent 10-year Treasury yield fall below 1% on Tuesday will likely prompt mortgage rates to decrease, experts said.
Chairman Jerome Powell said lowering the benchmark rate to a range of 1% to 1.25% was a response to the new coronavirus, also known as COVID-19, which “will surely weigh on economic activity both here and abroad for some time.”
Realtor.com’s chief economist Danielle Hale told Yahoo Money that with last week’s mortgage rates hovering just 14 basis points above all-time lows, a new low in mortgage rates is almost inevitable.
“Lower rates are likely to drive refinances higher, and may entice home buyers out to shop as well,” Hale told Yahoo Money. "That’s certainly the Fed’s hope.”
Tendayi Kapfidze, LendingTree’s chief economist, told Market Watch the lenders’ capacity is also a factor to consider as the coronavirus creates a low mortgage rate environment.
“If you don’t have enough people to process the volume you are getting in, you are not going to lower rates to attract more volume,” Kapfidze told Market Watch.
Guy Cecala, the publisher of Inside Mortgage Finance, told The Wall Street Journal the cut opens up a whole new world of refinancing for mortgage borrowers, who could have access to a “once-in-a-lifetime” refinancing opportunity.
“It’s a matter of time in terms of how fast lenders lower their rates to reflect a 10-year [U.S. Treasury note] and it’s also a question of how fast they want to go to that level," Cecala told WSJ. "But at a minimum, we are talking mortgage rates at 3.25% if not below 3% in the next few weeks, if everything stays the same.”
Mark Zandi, the chief economist for Moody’s Analytics, recently told Bloomberg it will be a “rip-roaring” market.
“If the virus becomes a pandemic and significantly destroys the global economy and the U.S. economy, it doesn’t matter how low rates can go,” Zandi told Bloomberg.