After slashing rates to zero, the U.S. Federal Reserve announced that it will begin buying $200 billion of mortgage-backed bonds, which would effectively lower mortgage rates. This move could counteract the sharp spike in mortgage rates that ended last week.
"It will help prevent MBS spreads from widening further to Treasury yields. It will keep mortgage rates in a happier zone under 4%. It will pave the way to a return to or below 3% in the coming weeks," wrote Matthew Graham, chief operating officer at Mortgage News Daily, according to CNBC.
These practices have been put into place in order to help folks who are affected by temporary unemployment, according to the report. It is also designed to help potential homebuyers make a decision as they secure a home. Unfortunately, there is plenty of uncertainty surrounding home buying as consumers are heeding the advice of health professionals and staying put. In addition, buyers are being much more cautious with economic uncertainty and possible periods of unemployment around the corner.
"By acting swiftly to tamp rates down and pledging ongoing support, the Fed may have ‘flattened the curve’ in the housing market – diminishing some of the urgency households may have felt to buy or refinance now less they miss out and keeping demand strong further into the future," wrote Danielle Hale, chief economist at realtor.com, according to the report. "However, the Fed is acting because the path ahead for the economy is uncertain, and the housing market could be impacted directly and indirectly."
To learn more about how the Fed's recent rate cut could impact mortgage rates, click here.