Banks not passing along interest cuts?

[birdawg]

My in-laws have been house hunting for several months and just signed a deal last week. Today they called their bank to get an updated rate and they said it's the same as last week. What's the point of QE if banks don't pass it along?

 

[BoDawg.sixpack]

The Federal Funds rate and the interest rate your local bank gives you are not sticky. The banks get cheaper loans from the Fed when the rate drops and they use consumer demand to determine how much interest it would be prudent to charge their customers so that A) they don't scare their customers off and B) so that they stand to make a profit. The lower Federal Funds rate ensure banks have a continuous supply of liquidity. That's all.

 

[ronpolk]

I wouldn’t expect mortgage rates to go down much lower. Maybe adjustable rates but fixed rates not likely to go dramatically lower. No matter what the fed rate is doing right now, some bank still had to hold that interest rate risk for 15-30 years.

 

[SyonaraStanz]

Mortgage rates follow the ten year treasury. I’m not sure what it’s doing.

 

[bulldogbaja]

As has been stated: the two are not directly connected, and there is a lag.

 

[aTotal360]

They are trying to deter business because they don't have the capacity to handle it. The lenders I work with are doing 5-7x the business they normally do. They don't have the bandwidth.

Consumers won't feel the rate cut for a couple more weeks.

 

[Cooterpoot]

I wouldn’t expect mortgage rates to go down much lower. Maybe adjustable rates but fixed rates not likely to go dramatically lower. No matter what the fed rate is doing right now, some bank still had to hold that interest rate risk for 15-30 years.

Once banks get to the point of handling applications, you'll see another drop.

 

[4suredog]

It could also be as simple as a "lock". Many times the lender will ask if you want to lock or not, if you do, they do and your rate then doesn't change....

 

[ronpolk]

Once banks get to the point of handling applications, you'll see another drop.

I do think you’ll see another drop but I don’t think it’s going to be dramatic. I could very well be wrong.

 

[harrydawg.sixpack]

I have been investigating this today to make sure I don’t need to do anything......

I locked in at 3.25% in 2011 on a 15 year......spoke to my bank today and I can’t get much better (if any) than that now. He was double checking today but the rates have been so good for so long, drastic drops aren’t to be found now..........he did say that they pretty much bottomed out about 10 days ago.....?

 

[Cooterpoot]

I do think you’ll see another drop but I don’t think it’s going to be dramatic. I could very well be wrong.

The catch is, people aren't going to be able to complete a number of closings due to the virus issues. This is going to move more slowly than normal. Going to be a lot of back and forth. Folks don't want to lose a rate but they're "quarantined". I suspect you'll see one significant drop when the damn breaks.

 

[bully12]

My in-laws have been house hunting for several months and just signed a deal last week. Today they called their bank to get an updated rate and they said it's the same as last week. What's the point of QE if banks don't pass it along?

Wall St. Prime rate usually follows movement of the Fed Funds rate, but that has not happened as of yet. Mortgage rates won't move until Prime moves, and has already been stated, mortgage rates are more closely aligned with the 10-year treasury rate.

 

[bruiser.sixpack]

I know someone who refi’d at 2.88% 4 years ago. I would be very surprised if it got any lower than that again, but it might, maybe 2.75.

 

[Cooterpoot]

I know someone who refi’d at 2.88% 4 years ago. I would be very surprised if it got any lower than that again, but it might, maybe 2.75.

It was 2.5 a couple weeks ago.

 

[bruiser.sixpack]

Guess I didn’t see that 2.5 rate. Who had it at 2.5 for 15 yr refi?