Yes, Rates Are Near the All-Time Low

Mortgage interest rates continue to be near the all-time low levels we have been experiencing since June of this year. In today’s edition of m,y blog newsletter, I am sharing new and important data on interest rates for you to consider.

The Low Will Not Continue Until 2023

The main misconception I want to dispel this: Some people may believe that this historically low rate environment is going to continue until 2023, and that even lower rates will become available, especially for refinancing. This is NOT correct.

FHFA Fee Increase on Refinances

In last month’s issue, I discussed the refinance fee hike imposed on all loans sold to Fannie Mae and Freddie Mac, which was supposed to take effect September 1, 2020. The Federal Housing Finance Agency (FHFA) decided instead to push that time frame out to December 1, 2020.

Lenders who fund these mortgages must pay an increased fee of .5% of the loan amount to Fannie/Freddie when they sell the loan to them. Lenders are passing this fee increase on to the borrower, which translates to roughly a .25% increase to the loan rate.

You should also be aware that most lenders we work with have been taking between 45 and 60 days to complete a refinance — from application to funding. Because of the length of time to close, lenders are able to start imposing the fee increase in the third week in September 2020. Thus, by the time you are reading this newsletter, the fee increases on refinances sold to Fannie/Freddie will be in effect.

The Fed Fund’s Rate Suppression

Another factor feeding the misconception that rates will stay this low or even fall further is this: The media likes to promote as a positive the Federal Reserve’s continued suppression of their target interest rate, the Fed Funds (i.e.: the rate that banks charge when lending to each other overnight to cover funding shortfalls).  This makes for exciting news reporting. It is true that the Fed Funds is at .25% currently — and that is a new historic low, the record having been previously set from 2008 – 2016 to help the economy recover from the Great Recession at that time.

However, it is important to keep in mind: the Fed Funds rate ONLY impacts the Prime Rate, which doesn’t directly impact fixed term mortgage rates.

As I had predicted in previous issues of this newsletter, the Fed has extended the time frame to keep the Fed Funds r