Mortgage rates dropped during March. How low will they go?
In Texas and Florida, we’re seeing mortgage rates for some 30yr fixed rate loans as low as 3.5%. Jumbo ARMS (adjustable rate loans > $484,350) are also showing up with similar rates.
Current low rates have caught many by surprise after a run-up in rates during the 4th Quarter of 2018 and the early part of the 1st Quarter of 2019.
How low will they go?
It’s clear that the economy world-wide is slowing down and is now impacting Central Bank (“the Fed” in the US) interest rate policy. In theory (they’re wrong often…and often cause the problems they’re seeking to prevent) they raise rates when economies are strong…and lower when they see weakening.
Recently, you’ve probably seen articles or heard on the news that the yield curve’s inverting and the 85% success rate in an inverted yield curve predicting recession. When the yield curve “inverts,” shorter term debt will have interest rates higher than longer term debt.
HOWEVER, it’s just not that simple. While many components in the economy appear to be slowing (look at freight and auto sales data and you’ll see weakening data), other components are booming (service sector comes to mind).
And, while the yield curve is inverting…most of that’s occuring on the short end of the curve (short duration bonds) and not as apparent (at least as of this writing) on the long end of the curve.
So, what’s next for rates?
While it’s possible that rates will go even lower (some areas of the world are experiencing negative rates on debt, particularly in regions with very active and worried Central Banks)…and it’s estimated that $10 Trillion dollars in debt (worldwide) trades at “below 0” yields….mortgage rates in “the 3’s” in the US with an inflation rate around 2% are a pretty good deal right now.