Why Mortgage Rates Will Go Back Up, And Why We Hope They Do

Dear Friends,

    If you have been tracking mortgage rates lately, you know that they have been trending on a slow, gradual decline. Buyers who were in the market just last summer, can now qualify for more home as a result of lower interest rates and many of those that have purchased a home just last year, can already stand to benefit by refinancing. However, these recent interest rate drops may reverse upward faster than they’ve fallen; and this time around, we hope that they will.

Although, the Federal Reserve has yet to comment on whether the Coronavirus will impose a threat to the United States economy, concern over the virus has already shown that it has the ability to significantly impact our markets.To date, most of the economic impact stemming from fears of the virus have been more global in nature, and we have been insulated from wide spread reported cases and economic effects here in the United States. However, being that we are part of the global economy, our bond markets have already been pricing in possible economic slowdowns that could occur for the past several weeks now; hence, the steadily falling “mortgage” rates. In fact, on Monday, February 24th we saw the Dow drop 1,032 points and another 879 points on Tuesday, February 25th for a loss of 7.5% of it’s market share. As a result, the many investors that fled stocks invested more heavily in long term bonds, and mortgage backed bonds, thereby driving interest rates downward even further.

Some feel the Corona virus is a serious international health threat, while others feel that it may be somewhat overblown? Regardless, many are prayerful, and I would think that all are hopeful that a remedy will be found soon as a way to combat the coronavirus. But, until the time comes when it is no longer considered a major health threat (here or abroad), we should continue to see a low interest rate environment. When the fears of the Corona virus spreading eases, interest rates will surely rise to their normal market levels.  And that will be a good thing this time around.