Global yields may help US mortgage rates improve

Posted on by Evan in Rate Update, Swanson Home Loans Blog - Mortgage Rate Updates and More

Global connectedness made a major advancement on this day in 1911 when the New York Times sent the first around the world telegram.

The telegram which simply read, “This message sent around the world” left the New York Times newsroom at 7pm and arrived back in 17 minutes after being relayed via San Francisco, the Philippines, Hong Kong, Saigon, Singapore, Bombay, Malta, Lisbon, and the Azores.  Read below to learn how global connectedness is influencing the direction of mortgage rates.

Mortgage rates sideways

After home loan rates improved by ~.25% at the beginning of August they have essentially flattened out for the past two weeks oscillating within a .125% range.

Mortgage rates improved at the tail end of last week but increased over this past weekend.

In the near term it seems like we may see more sideways movement.  However, the longer-term outlook still looks positive for borrowers.

International Pressure

Presently much of the developed world has interest rates which are lower than here in the US.  The Central Bank equivalent target interest rate is 0% or less in the Eurozone, Denmark, Switzerland, Sweden, and Japan.

There is currently $16.7 trillion in negatively yielding government bonds.

As a reminder, the Fed currently has the Fed Funds rate target at 5.25% and our 2-year through 30 year bonds are yielding between 2-3%.  Think that is high?  At least we’re not in Argentina where the central bank target rate is 58%!!!

Although US interest rates are not likely to go straight down I do think lower yields in other countries will put downward pressure on our interest rates in the months to come.  If a borrower can afford to be patient it probably makes sense to do so.

Jackson Hole

Speaking of central banks, global bankers are meeting this weekend in Jackson Hole, Wyoming for the annual economic symposium.  Fed Chairman Jerome Powell is scheduled to deliver a speech on Friday in which many analysts think he will indicate another Fed rate cut later this year.

Outlook

Mortgage rates may increase in the near-term is we see US stocks rally again.  However, my longer-term outlook remains unchanged.  For borrowers who remain patient in I think it makes sense to float.

Current Outlook: floating bias