Mortgage Rates Do an About-Face
Mortgage rates started the year on a tear, continuing an upward trend that push them to highs not seen in years. There was one-party rule in Washington! A new president who wanted to spend a trillion on infrastructure! An aggressive Fed eager to push interest rates higher and higher! And then, reality set it.
First, the one-party rulers failed to pass a healthcare bill. This exposed deep rifts within the party, and cast doubt on the spendy president’s ability to get his agenda passed.
All of this played out against a backdrop of global uncertainty, with a (potentially) unravelling European Union, a horrible civil war continuing in Syria and an emboldened young tyrant in North Korea, eager to play with his nuclear toys.
According to Bankrate, the international tensions, coupled with a spate of weak economic data, have prompted more investors to move into safe haven instruments like U.S. Treasuries.
When bond prices rise, bond yields fall and mortgage rates are closely related to the yields on long-term government bonds.
And fall they have: last week, the benchmark 30-year fixed mortgage rate fell to 4.16 percent – its lowest level of the year, Bankrate said.
Weakness, uncertainty, and nervousness, which have each been in plentiful supply in recent weeks, are good news for bond investors and mortgage shoppers alike.
Expectations for a June Fed interest rate hike have also eased slightly, further contributing to the downward adjustment on bond yields and mortgage rates.