The Federal Reserve implemented two emergency interest rate cuts since the coronavirus outbreak, bringing the yield on Treasury bonds to almost zero percent.
We point this out because the stock market crash can have an effect on interest rates as well.
When investors start thinking the stock market is too risky, like what is already happening, selling their stocks because of the situation, and rather they start to buy up bonds. The increased demand pushes the price of bonds higher. The higher the price of bonds, the lower the interest payment on mortgages or debts in general. This is called the yield. When bond yields are lower, mortgage rates are lower, too.
However, the New York Times reported that this inverse relationship between stocks and bonds has not held as firm as it has historically. Most likely it is because interest rates were already extremely low. Rates are down to around 3.8 percent and even lower. This number has been the same throughout the pandemic. The question then becomes whether mortgage lenders are willing to go lower, regardless of whether the Federal Reserve cuts its target rate again. We find it important to share this with you because this is a different circumstance than the last pandemics and even a different factor than what happened in 2008. We recommend that everyone proceed with their buying and selling activities as planned to be able to maintain a solid housing marketing within our economy.
Do you have Cheyenne and Laramie County real estate questions? Connect with me or one of our RE/MAX Capitol Properties agents today with no obligation to get your answers at 307-635-0303 or online at cheyennehomestore.com.