A long-term view of rates
If you took out a mortgage in the 1300s then it’s probably time to refinance. A new working paper from the Bank of England looks at a trend in global interest rates over the past eight centuries.
The findings show that interest rates have been trending lower over the past ~800 years.
Should the trend continue then our grandchildren receive interest (negative interest rates) when they borrow money.
Home Loan Rates
Looking at a much shorter-term…. Mortgage rates here in the US remain at very attractive levels despite an easing of geopolitical tensions between the US and Iran over the weekend.
Stocks and home loan rates
Corporate earnings season is upon us. For the next couple weeks publicly traded companies will release their 4th quarter earnings reports.
In aggregate, when earnings are stronger than expected it generally causes stocks to rise and hurts mortgage rates and vice versa.
Last week’s all-important jobs report came in slightly softer than expectations. It showed 145,000 new jobs were created in December and the national unemployment rate of 3.5%. All in all, the report signals continued strength in the economy.
However, looking back over the past few decades every recession has started while the unemployment rate is at cyclical lows.
The week ahead
This week’s economic calendar is relatively light. On Thursday we get retails sales and on Friday it will be housing starts and consumer sentiment.
From a technical perspective mortgage rates are trading in a wide range. I will be watching the stock market for direction. If stocks rally then consumers should lock. If stocks trade sideways or decline then consumers can afford to float.
Current Outlook: neutral