The Strange World of Mortgage Interest Rates

Having been a mortgage originator since 1987, I have ridden the wave of mortgage interest rate upswings and downswings. Back when I first started, a 30 year fixed rate mortgage resided in the double digits. It was a different world back then, if I refinanced someone’s mortgage down to 11.75%, I was considered a hero.

Much has changed since then. The global markets now affect each other in many different ways. If someone sneezes in China, we catch a cold here in the United States. In general, if the bond markets (particularly the ten year treasuries) do well, long term mortgage rates do well. If the stock market is having a bad week, chances are investors will run to bonds, and mortgage rates will react favorably. It’s a lot more complicated than that, but for the purposes of this article, I’m keeping things simple.

If you’ve been reading the financial news over the last year or so, mortgage interest rates were supposed to keep climbing in 2019. Instead, mortgage rates are at their lowest level in more than a year. Why? you ask. There are many factors, including what the Fed is thinking about inflation for example. Maybe our current trade negotiations with China have something to do with it. More than likely those are factors, as well as many other things.

According to Mortgage News Daily: “early 2019 saw a rapid reevaluation of big-picture trends in rates and in markets in general…the Federal Reserve has been a key player, and while they aren’t the ones pulling the global economic strings, their response to the economy has helped rates fall more quickly than they otherwise might. Based on the Fed’s laundry list of concerns, their current outlook for rate hikes and economic growth, and their bond-buying policy shifts, we’ve all but certainly seen the highest rates of this economic cycle in late 2018.”

So what does that mean for you, the home owner or prospective home buyer? If you already own a home but are mired in credit card or other consumer debt, now might be a time to consider a cash out refinance. Is that the answer for everybody? Not necessarily, it depends on a number of factors. Taking a few minutes to speak with a mortgage professional like myself may be in the cards.

If you’re thinking about buying a house, you may have hit the lottery. In a year where higher mortgage rates were expected, you get to reap the windfall over rates falling just in time for the spring season. Given that the economic picture may be different next year, I would suggest reevaluating your options and consider buying now, when your purchasing power just got a shot in the arm.

Congratulations on being a financial wizard and timing the market just right!