March 26, 2019
Rates are the lowest they have been in over a year thanks to the Feds decision to halt all interest rate hikes for the remainder of 2019.
• At the end of last week, the average top-tier 30yr fixed mortgage rate quote was 4.625%.
• As of today, the exact same scenario would be at 4.375%–a quarter of a percentage point lower.
• That’s an uncommonly big move for a single week, but it’s one we’ve been tracking eagerly in recent days.
Why is it happening?
• The first phase of the move had to do with the Fed’s surprisingly friendly policy
announcement on Wednesday.
• Due to the time of day that the Fed news came out, markets didn’t have a chance to fully react to it until Thursday.
• Even so, the drop in rates was already much bigger than average. But this
morning took it to the next level.
• In the middle of the night (in the US, anyway), economic data for Europe was
released that showed a serious slowdown in German and French manufacturing.
• The Fed has repeatedly cited European growth concerns as a reason for its
aggressive policy changes, so the news was all the more meaningful.
• European bonds tanked by the time US markets opened (“tanked” in this context refers to rates moving lower).
• Early in the domestic trading session, US economic data was similarly weak, thus
reinforcing another warning from the Fed about European weakness spilling over
to the US.
• With that, bond yields fell rapidly at home and abroad–to the point where there
was a bit of a frenzied rush to buy (when traders buy bonds, rates move lower).
Will this continue to happen?
• There’s never any way to know if a certain move in rates is sustainable or susceptible to a quick bounce.
• In general, it will be up to the incoming economic data.
• After all, whether we’re talking about Fed policy or the global growth
implications themselves (both things that rates care about), it’s the economic data
that will cast the biggest votes.
Thank you to Adam Dellemonico of Movement Mortgage for keeping me in the loop!
If you are looking for a great lender, he’s your guy! Tell him Jeannine sent you!