The Fed cut interest rates to zero, but don’t expect to see 0% mortgages anytime soon

Mortgage rates in the U.S. could hit new record lows as the coronavirus outbreak continues, but there are multiple factors preventing them from falling to zero. The Federal Reserve’s decision to cut interest rates may indirectly push mortgage rates lower — but Americans aren’t likely to see 0% mortgages in the near future. The Fed announced late Sunday that it was cutting its benchmark federal funds rate by 1% to a range of 0% to 0.25%, alongside other measures meant to stimulate the nation’s economy as it takes a major hit from the coronavirus pandemic.

Social distancing likely to affect physical mortgage closings.

Even as mortgage application volumes climb, the physical ability for those loans to close could be in question as authorities call for social distancing to prevent the spread of Covid-19. While electronic closings are a possible solution, they run into state law impediments such as the permissibility of remote notaries. Government agencies are making policy adjustments for some in-person requirements related to mortgage processing, but not all, and closings do not appear to have been addressed to date.

Treasury yields rebound slightly as investors await clarity on fiscal stimulus.

Treasury yields climbed slightly on Tuesday as investors sought more details on fiscal stimulus from the Trump administration to battle the coronavirus fallout. The 10yr UST price is down 26/32 to yield of 0.806% as of 9:17 AM ET, and UMBS 2.5% prices are down 1/32, 3.0% are down 1/32, 3.5% are down 3+/32, 4.0% are down 4/32, and 4.5% are down 6+/32.

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dmlld19odG1sX2lkIjoiY3NwRm9ybVNoZWxsXzExXzc0OTYzOSIsImNvbm5lY3RfaGFzaCI6IjdlNmVhNDk4NjFhOGRjNWMzZDgxM2M5MTRjNzE4NWFkIn0=

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