This is probably one of the most common questions that we’re getting recently – with mortgage rates at an unprecedented low, could they go lower – or will they go higher?
Bad news for the economy, is good news for mortgage rates – but why? In short, mortgage rates are linked to longer term Treasury rates, and as bad news comes in, money leaves the stock market, and goes into the bond market, a place of relative safety. As bond prices increase in response, rates or yields begin dropping – the more expensive the bond, the lower the yield, or return. So, the result is lower mortgage rates.
In a new forecast, mortgage company Fannie Mae expects average 30-year mortgage rates will keep dropping, to 3.0% by the end of this year and to just 2.9% during all of 2020.
Fannie Mae chief economist Doug Duncan says extremely cheap mortgage rates will continue to please homebuyers — and homeowners looking for refinance savings.
“We … expect the extremely low mortgage rate environment to contribute to historically high levels of refinancing activity as household balance sheets and incomes improve,” Duncan said, in a news release.
However, as good news comes in, money will flow out of Treasury bonds and back into the stock market – causing rates to increase.
That means if you’re thinking about buying a home or refinancing, don’t try to “time the market” and wait for the perfect mortgage rate, because rates could very well go in either direction.