Mortgage Rate Update January 5, 2015

Happy New Year!  I sincerely wish you a successful and happy 2015!

Mortgage rates are starting the new year off with a slight decline.  30-year fixed mortgage rates are currently at the best levels since May of 2013.  What is pressuring rates lower?

Two main themes are helping mortgage rates.  First, weakness is Europe continues to plague their economies.  Stock indexes in England, France, and Germany are all off 2.00%-3.45% today.  It is increasingly evident that the European Central Bank will need to engage in additional monetary stimulus to prop up economic activity on the continent.

When this happens the Euro will likely continue to weaken against the dollar.  Therefore, many European investors are investing in US-dollar denominated assets, including mortgage-backed bonds, which is pressuring yields lower in the US.

Second, oil prices continue to fall.  In fact, Brent crude oil is trading 6.24% lower today.  Lower oil prices will soften inflationary pressure and allow the Fed to keep short-term interest rates lower for a longer period of time.  Furthermore, because the US is now a major producer of oil lower prices will also have a negative impact on our national economy.  Bad news for the economy is good news for interest rates.

I see these two trends continuing and therefore would not be surprised to see rates improve another .125%-.25%.  I recommend floating.

Current Outlook: floating