Duplex interest rates

[Meredith Mihm]

We're putting in an offer on a duplex in Winona, MN. Our normal lender just quoted us 4.9%, with 25% down on a 30 year. I'm hoping we can beat that! All help is appreciated! 

[Joe Splitrock]

@Meredith Mihm the Fed started buying every available mortgage back in March 2020, which had the effect of driving interest rates to all time lows. Since that time, the Fed has grown their mortgage bonds balance sheet to $2.7 trillion dollars. At the end of last year, they announced they would cut back on buying mortgage backed securities and phase out all purchases in the first part of 2022. They started doing that and the market responded with higher rates. Bad news is on top of wind down buying new MBS, they are expected to unload some off their balance sheet in the first half of this year. In addition they are planning 5 prime rate increases, the first in March. These actions are meant to cool the housing market and slow inflation. 

Go ahead and shop for a better rate, but odds are very good in six months you will be saying, "I wish someone would lend at 4.9%". w

Sorry for the bad news. This is the consequence of the Feds overly aggressive monetary actions during COVID.