Skip to main content

Mortgage Rates Could Slip Below 3% As Fed Continue Buying Low-Coupon Bonds

Navi Persaud
May 13, 2020
Newspaper article about rates. Credit:

As the Federal Reserve continues to purchase low-coupon bonds to stimulate the U.S. economy, mortgage rates under 3% could be more of a reality. Lenders could potentially sell mortgage loans below 3% following the Federal Reserve Bank of New York's purchase of contracts for $240 million of mortgage bonds with a 2% coupon, according to a Bloomberg report via Yahoo Finance.
"And the Fed isn’t finished with the low-coupon securities. The central bank has said it will buy more this week as part of $20 billion in planned securities purchases, virtually guaranteeing a buyer for recent 30-year mortgages with rates as low as about 2.5%," according to the report.
The report revealed that some lenders still aren't willing to lend below 3% given the current climate of unemployment. Additionally government action does not force lenders to change their rates.
"Lenders sell most of the home loans they originate, and the bulk of those end up in securities issued by government-owned mortgage giants Fannie Mae and Freddie Mac," according to the report. "The securities typically offer yields around 50 to 100 basis points lower than what borrowers pay on their 30-year mortgages, taking into account various fees. That means a bond offering 2% typically will contain loans to households paying 2.5% to 3%."
Click here to learn more about the potential for mortgage rates below 3%.

Supreme Court Gives Biden Full Control Over Federal Housing Finance Agency

The U.S. Supreme Court gave President Joe Biden the authority to remove the head of the Federal Housing Finance Agency (FHFA) while dismissing claims from shareholders of Fannie Mae and Freddie Mac.

Industry News
Jun 23, 2021
Ocwen Financial To Acquire Reverse Mortgage Servicing Platform

Ocwen Financial Corporation's wholly-owned subsidiary, PHH Mortgage Corporation will acquire RMS' reverse mortgage servicing platform.

Industry News
Jun 18, 2021
UniteCT Emergency Rental Assistance Succeeds

Thanks to the successful launch of the UniteCT program, emergency rental assistance funds are helping Connecticut residents maintain housing.

Industry News
Jun 17, 2021
Angel Oak Mortgage Announces Initial Public Offering

Angel Oak Mortgage announced its initial public offering of 7,200,000 shares of its common stock at $19 per share.

Industry News
Jun 17, 2021
Mortgage Apps Rebound After Three Consecutive Weeks Of Declines

The Mortgage Bankers Association reported the first increase in mortgage applications after a three consecutive weeks on declines.

Industry News
Jun 17, 2021
CFPB New Rule Prevents Predatory Lending To Military Service Members

The CFPB stipulates its authority to examine supervised financial institutions for risk to active duty servicemembers and their dependents.

Industry News
Jun 16, 2021