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Added Relief From the Federal Reserve

Alexis: Hey, everybody. Welcome back to the Mortgage Rundown. My name is Alexis Quinney, and I'm here with Jason Obradovich, CIO of New American Funding. How you've been doing, Jason?

Jason: Good, Alexis. How are you?

Alexis: Pretty good. Can't complain.

Jason: Great.

Alexis: So, since we last spoke, it doesn't seem like interest rates have moved very much. Is that correct?

Jason: Yeah. In fact, they haven't moved very much at all. You know, we had so much volatility going into Covid, and as all the uncertainty around Covid, you know, rates continue to drop and drop and drop. And they kind of hit a floor about 30 days ago. We'll try to put a chart up on the screen where you can see it. But things have really, really leveled off. And when you look at the Federal Reserve, they've kind of found that balancing point where they say, 'Look, this is how much we're going to want to improve mortgage rates. This is how much we're going to improve Treasury rates. And anything else that happens after that is going to be based on the impact of those rate changes or potentially anything that happens from the legislative body.' So, whether there's stimulus, you know, we've had unemployment benefits, and other things that have come out, really, they've decided we're going to leave mortgage rates here and we're not going to move them.

Alexis: OK, got it. So, the FOMC meeting happened last week. So, is there anything that we should be concerned about? Anything that we need to pay attention to? Can you just give us a little update on what was announced then?

Jason: Yeah. You know, a lot didn't happen. You know, these meetings have become a little bit boring considering we're in the middle of a pandemic. But like I said just prior, they've kind of done everything that they're going to do. And so what they came out with last week, they said, 'look, you know, prior we had, you know, they had told us that they're going to keep or they're going to keep rates low until the end of 2022.' Well, they came out last week and said we're probably going to keep rates low until the end of 2023. So, they've added another year. So, we should expect to be in this rate environment for quite a long time. They really feel that the ill effects of this pandemic and what it's done to certain sectors of the economy is going to last for a really long time. And they actually are calling on Congress to do more as well, saying, 'Look, they can lower interest rates and help your mortgage rate. But that doesn't really help a lot of people who either don't own a home or they lost their business. Right? Rates do some, but they don't do everything.' And so, they're asking Congress, you know, 'you need to do more.'

Alexis: OK. Got it. So, without getting into politics, we do have an election coming up. So, I'm curious how that might affect rates. What are your thoughts there?

Jason: I think what the Fed did is they said, 'Look, we're going to keep rates low until the end of 2023,' and that's really regardless of what happens in the election—you know, depending on who controls Congress or who's in the White House. They're saying, 'Look, this is a pandemic. That's politics. We need to help the economy.' You know, who's voted into office does have some impact. But really, the economy is what it is. They need to support it. They need to support it through their interest rate policy, keeping rates near zero for a long period of time. So, if I'm a borrower, I'm not as much concerned about where rates are from the election. You may concern yourself more with, you know, what legislation or the Supreme Court or taxes. But from an interest rate standpoint, it really doesn't matter.

Alexis: OK, well, that's good to know. Well, those are my only questions for today. Again, another great update. Thank you for taking the time, and yeah, I'll talk to you again soon.

Jason: Yeah, thanks. Appreciate it. Take care everyone.