The Fed cut rates to 0%

What does this mean exactly and how will this affect mortgage rates?

The Federal Reserve announced it will drop interest rates to zero and buy at least $700 billion in government and mortgage-related bonds. This is part of an emergency action plan in response to the risks COVID-19 poses to the United States economy.

Mortgage rates have already dropped to 50-year lows in response to global concerns regarding the outbreak. The rate the government lends money to banks has now been cut to 0%. By cutting rates to 0%, the Fed is encouraging banks to lend at lower levels in efforts to help stimulate our economy.

Last week, mortgage rates actually increased slightly because the demand for refinancing was so high. Lenders needed to slow down the number of people applying for home loans and give themselves time to work through the backlog of applications that accumulated as rates fell.

The Federal Open Market Committee (FOMC) lowered the federal funds rate in an emergency reduction with a target range between 0-0.25 percent. It is the first time the U.S. central bank has reduced rates at an unscheduled meeting within 13 days of each other. In addition to cutting rates, the Fed also declared it would buy Treasury debt and mortgage-backed securities at a pace of $500 billion and $200 billion respectively.

While Fed officials spoke confidently about the U.S. economy’s ability to remain resilient against the COVID-19 slowdown, many experts have cautioned that a recession could be on the horizon.

Experts say the best way to recession-proof your finances begins by boosting your emergency savings. It is highly recommended to keep between four and six months worth of expenses liquid and accessible. Consider opening a high-yield savings account to get the biggest return on your fund. Prioritize paying off your high-cost debt.

Take advantage of the low interest rates and lower your monthly payments by refinancing your mortgage. It is imperative to save for your future.

Call Focus Capital with any questions or concerns, we are here to help you in these uncertain times: 1-888-758-3004
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