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Is 2019 Q1 a Perfect Storm For Low Rates?
Economic uncertainty is a friend to low mortgage rates. There is plenty of apprehension in the news this month. So could the first quarter be a brief window for consumers to lock in bargain rates?
The longest shutdown in U.S. government history is underway with no end in sight. Internationally, Britain is untangling how to leave the European Union. These factors and more cause investors to flee the stock market and take shelter in the bond market. That shift puts downward pressure on residential mortgage rates.
Mike Fratantoni, chief economist for the Mortgage Bankers Association (MBA), said in a press release today, “Uncertainty regarding the government shutdown, slowing global growth, Brexit, a more patient Fed, and a volatile stock market continued to keep rates from increasing.”
Indeed, the 30-year fixed mortgage rate benchmark has been on the decline for the prior 6 weeks. The trend turned sharply downward in early December with the prospect of an impasse in the government shutdown negotiations.
The chart below from the Federal Reserve Bank of St. Louis shows the path of the 30-year fixed rate for all of 2018.
Earlier this week, mortgage rates fell to their lowest level in 9 months, according to Freddie Mac’s Primary Market Mortgage Survey (PMMS). The drop comes after rates have been on an steady uphill climb since the start of 2018.
The dip coincided with mortgage purchase applications reaching an 8-year high last week. Refinance applications as a share of total mortgage activity reached its highest level since January 2018. Perhaps sensing that the best rates are in the rearview mirror, many buyers are now moving off of the fence.
Mortgage interest rates could resume their upward trend swiftly if a compromise on the government shutdown is reached in the coming weeks.
Buyers interested in locking a low rate for a purchase or refinance in 2019 should consider floating an application with a lender and be positioned to move.
Timing has always been a key element in my life. I have been blessed to have been in the right place at the right time.– Buzz Aldrin, American astronaut and Apollo 11 lunar module pilot
