Interest rates on home loans have been low for months and a lot of people have been refinancing their houses recently. So what effect has the COVID-19 pandemic had on mortgage rates?

"When we saw coronavirus make global news, interest rates went down," said Shivani Peterson, Mortgage Advisor with All Western Mortgage. "When we saw it make U.S. news, interest rates went down. But then something interesting happened that a lot of people aren't talking about. The mortgage industry faced a huge capacity issue. There was $5 trillion of mortgages trying to be refinanced. in a normal year, our industry does $3 trillion between purchases and refinances. So it was impossible to try and process $5 trillion in one month; it was going to break the system. So investors across the board raised their interest rates. "

That happened around the same time the Feds cut the short-term lending rate to zero.

"The short-term rate the Fed cut is the rate banks lend to each other on," Peterson said. "They call it the overnight rate. Mortgage interest rates will typically be affected by this but not directly; it's not a direct correlation. So we're seeing mortgage rates go up because investors couldn't handle the refinance volume, so that's how they addressed the capacity issue, they just all raised their rates because they couldn't take any more refinances. But meanwhile the fed has cut the short term rate to zero and everyone is calling their mortgage lender trying to get a rate lock on their refinance."

She says anyone looking to refinance right now should call their lender, get the paperwork done and be patient.

"Right now may not actually be the best time to lock a rate," Peterson said. "We need to let these capacity issues filter out, let the madness die a little bit, let the industry get its footing back. And then, we're definitely headed into a recession. We're going to see great interest rates for a long time. So get your application in and be prepared to wait. Typically a refinance takes about three weeks to get done, right now we're looking at more like 30-45 days. So have a longer mindset in place to have the right expectations and be okay with waiting if it takes awhile to lock the right rate."

For those that have been hit hard financially, there's a way to put your mortgage on hold through a forbearance option.

"Mortgage services are already offering mortgage forbearance," Peterson said. "And what that means is you put your mortgage payment on hold. You're not going to not make those payments - the interest is going to be added to the end of your loan. You'll basically defer your payments to a later date when you've hopefully got your income back in order."

She says that process is moving a lot faster than it did back in the Great Recession.

"This time, everyone's really trying to be proactive to protect our economy and not let this get catastrophically bad. We don't want anyone to lose their homes this time around," Peterson said. "We don't want this to turn into what happened in 2008. So the government, the industry, everyone is working together to try to prevent that from happening."

She says the phones there have been ringing off the hook in recent weeks.

"I've been in this industry for eight years and I've never seen anything like this," Peterson said. "It's an overwhelming amount of business, not just in terms in the number of transactions, but the advice that is needing to be given. People are really seeking our help in navigating this crisis and what they should do so they don't lose their home or have a negative impact on their credit."

For more information, visit: https://allwestern.com/