As the COVID-19 crisis continues to evolve, volatility and uncertainty have swept through the financial markets.
Borrowers saw wild swings in interest rates over the last few weeks and were left to wonder whether they could still qualify for specific loan amounts and close on pending transactions.
Amidst the chaos, Guaranteed Rate has been a steady ship in rough waters. We asked them to answer a few questions pertaining to the impacts market volatility has had on the mortgage industry, and they responded with some helpful guidance. Read, share, enjoy and contact your trusted Guaranteed Rate loan officer with any questions.
@home: First of all, what happened with interest rates last month?
GR: Rates came down at the end of February creating a big refinance boom. Combine this with Spring homebuying activity that was already well ahead of last year's pace and lenders nationally were dealing with huge pipelines of business. Enter COVID-19.
Increasing unease over the economic effects from the novel coronavirus spread forced The Federal Reserve to make significant moves in March. All these factors have led to extreme volatility in the secondary mortgage market. The lasting impact of COVID-19 and its impact on the economy forced the Fed to slash Fed Funds rates to zero. The expectation was mortgage rates would fall in response to the Fed's activities, but they initially did the opposite. Whether this was due to concern the impact of the COVID-19 was more significant than originally feared, because financial insiders saw the Federal Reserve measure was a short-term fix, or other factors is uncertain. As a result, rates shot up amid a bond sell-off, and we saw national 30-year fixed rates jump from the low 3% range to the mid 4%'s range.
More recently on March 23rd the Fed announced their most aggressive market intervention to date. The new move represented an open-ended commitment to the Quantitative Easing program. This longer-term commitment allowed for rates to move closer to anticipated lower levels in the mid-3% range.
Without question, health and economic concerns have led to extreme market fluctuations. As this continues, the markets will continue to rise and fall due to a vast range of factors. What's important is rates are historically low based on almost all standards, making it a great time to refinance, or purchase a home.
To learn more, our blog post provides a deeper explanation.
@home: So, can homebuyers get a mortgage now?
GR: The answer is yes. While our employees may be working remotely (to ensure social distancing), we are absolutely open for business. Through our proprietary technology, originally developed in 2015, we're equipped to operate home loans end-to-end with almost no physical human contact. From digital mortgage applications to loan approvals to "No-Contact Appraisals℠", and even hybrid or e-closings via our FlashCloseSM* platform whenever possible – we're getting it done.
There is a functioning mortgage market that allows for homebuyers to get financing for their new home, and our loan officers are here to help them. To watch how we're ensuring social distancing through digital mortgage tools, click here.
@home: How has this crisis changed the process of obtaining a mortgage?
GR: The mortgage industry has traditionally been recognized as "behind the times", technologically speaking. However, Guaranteed Rate has been at the forefront of fintech evolution for years now – launching the first digital mortgage in 2015. Our key focus remains implementing tools that ensure the best possible experience for our customers, whether we are in crisis mode or not.
So, from a process standpoint, there really hasn't been a major change for how we do business, aside from not being able to meet in person. Applications, approvals, underwriting, appraisals and closing – it's all handled electronically whenever possible. As a local firm, we love to meet our clients face-to-face, but it's not a necessary step in getting a loan – plus, there's always FaceTime! We're as prepared to handle this situation as any industry. We feel fortunate to be able to keep mortgage approvals and fundings moving.
@home: Back to rates. What advice would you give borrowers about when to lock in an interest rate?
GR: This is important. Based on recent market volatility, borrowers can expect rates to fluctuate from the time they get pre-approved, to the time they're under contract, to the time they lock. We've seen that there are any number of factors that can drive rates up or down, and they don't always behave predictably, especially in times like these. So, the advice we would give borrowers any time but especially now is don't try to time the market. If you like your rate – and there's a lot to like about rates right now – lock it in.
@home: Do buyers need a pre-approval?
GR: A pre-approval is absolutely essential. First of all, any seller in today's market is going to insist that a buyer walking into their home at least has the wherewithal to make the purchase. Second, because of rate volatility, buyers should be approved for a loan amount within a range of interest rates. A preapproval shows the seller that you are a very serious buyer and assures them that no matter what the market conditions the borrower can still qualify and close.
And all of this brings us to another point, which is that it has never been more important to work with a mortgage lender who is in constant communication with the borrower and their real estate agent, and who can actually deliver what and when they say they're going to deliver. It's not just about interest rates. It's about meeting deadlines, being able to deal with any issues that come up and ultimately making sure the homeowner closes on their home. On top of all this, we want to ensure all parties experience a successful transaction in a safe and healthy environment.
Have more questions? To speak with a trusted Guaranteed Rate loan officer near you, click here.
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Sources:
¹ CNBC: "Fed Cuts Rates by Half a Percentage Point to Combat Coronavirus Slowdown"
² CNBC: "Fed Announces a Slew of New Programs to Help Markets Including Open Ended Asset Purchases"
³ CNBC: "Mortgage Bankers Warn Fed Purchases of Mortgages Unbalanced Market Focusing Margin Calls"
Guaranteed Rate Disclaimers:
- *FlashClose eClose is not eligible in all states and is not eligible for all loan types or investors. Conventional loans only. Eligible for primary, 2nd home and investment properties. Title company restrictions may apply.
- Residential mortgages are packaged together and sold to investors as mortgage backed securities. This is known as the secondary mortgage market.
- Applicant subject to credit and underwriting approval. Not all applicants will be approved for financing. Receipt of application does not represent an approval for financing or interest rate guarantee. Restrictions may apply, contact Guaranteed Rate for current rates and for more information.
- All information provided in this publication is for informational and educational purposes only, and in no way is any of the content contained herein to be construed as financial, investment, or legal advice or instruction. Guaranteed Rate, Inc. does not guarantee the quality, accuracy, completeness or timelines of the information in this publication. While efforts are made to verify the information provided, the information should not be assumed to be error free. Some information in the publication may have been provided by third parties and has not necessarily been verified by Guaranteed Rate, Inc. Guaranteed Rate, Inc. its affiliates and subsidiaries do not assume any liability for the information contained herein, be it direct, indirect, consequential, special, or exemplary, or other damages whatsoever and howsoever caused, arising out of or in connection with the use of this publication or in reliance on the information, including any personal or pecuniary loss, whether the action is in contract, tort (including negligence) or other tortious action.
