Understanding Recent Federal Reserve Changes With A Mortgage Lender In Santa Clarita

There have been several major changes made by the Federal Reserve recently, so a mortgage lender in Santa Clarita is helping the community understand what these changes mean.

Near the start of the coronavirus outbreak in America last month, the Federal Reserve announced that they would lower the federal fund rate to between zero and a quarter percent, noted American Family Funding Mortgage Advisor Fred Arnold.

The federal fund rate was defined by Arnold as the rate in which the Federal Reserve lends money to financial institutions, and this rate was probably reduced as a response to the national panic response seen in relation to the coronavirus pandemic.

“I think the brilliance behind that was, what if everybody goes (and) instead of buying toilet paper and buying all the things they’ve been buying in the supermarket, what if they run and get cash?” said Arnold. “(The Federal Reserve) didn’t want there to be a run on cash in the banks, so therefore, you can borrow from most banks at little to no money interest rate required.”

Other financial impacts of this decision include reduced interest rates on car loans, credit cards and home equity lines of credit, Arnold continued.

In addition, a change was made by the Federal Reserve to the requirement about minimum dollar amounts banks need to have in their reserves, according to Arnold.

“(This was an) even bigger thing they did,” he said. “Reserve requirements, they dropped that, which was very important because it added to liquidity in the market.”

The final recent change from the Federal Reserve is anticipated to have long-term benefits on mortgage interest rates, but the effects won’t be seen for awhile, Arnold noted.

“They committed to buy $700 billion in treasuries and mortgage-backed securities to cause interest rates to either stay low or not go much higher than they currently are,” Arnold concluded.

Santa Clarita mortgages lender American Family Funding can help you fulfill your dream of home ownership. A highly rated Santa Clarita mortgages lender, American Family Funding maintains a focus on community involvement and a commitment to giving back whenever possible. A friendly mortgage advisor will make the first time homebuyer experience an easy and stress-free experience — even with bad credit or a low down payment. The Santa Clarita home loan officers at American Family Funding also specialize in VA loans, reverse mortgages, refinancing and the STAR Loan Program.