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Home Borrowing Costs to Remain Low?
Net Admin • July 14, 2020
Change is the new normal these days. How about for the housing market and mortgage rates? Will rates move another leg lower or is this the bottom? What’s next for them?
There are 3 things to track as we move through summer:
- Spikes in coronavirus cases in several states: This is a real concern that comes with both a human and economic toll. We have to watch and pray that hospitalizations don’t increase significantly. From an economic standpoint, there will be a negative effect. Stocks may decline, thereby helping Bonds and rates.
- Overwhelming policy response: The Fed, Treasury, and administration are spending trillions of dollars to help underwrite the economic recovery, and many trillions more will be spent. There are rumors that another PPP (Paycheck Protection Program) plan will come together before Congress recesses in August. The Fed will continue to purchase mortgage-backed and Treasury securities in the open market and will hold rates near zero for as far as the eye-can-see.
- Watch the technicals: For all rates – including home loan rates – to improve much further, the 10-year yield has to move beneath .60%. This is something that has only happened a couple of times during the darkest moments of COVID-19. For Stocks, the S&P 500 is trying to remain above its 200-day moving average, currently at 3,020, an important technical marker. If Stocks regain some of this week’s losses, it could be at the expense of Bonds and rates. Should the S&P 500 move sharply beneath its 200-day moving average, we will likely see an extended selloff, thereby helping Bond prices.
The next directional move in the financial markets and the overall economy will likely be determined by the first two bullets, with the technicals further confirming this move. One thing is for sure, mortgage rates are expected to remain low. And backing up this claim is Fannie Mae forecasting 3.2% for the 30-year fixed-rate mortgage in 2020 and 2.99% in 2021.
If you or anyone you know has questions about home loan rates or products, please reach out to us at Popish Mortgage. We are happy to answer all of your questions and get, or keep, you on the path to home ownership. Contact us and let us help you reach your dreams.
Source: Mortgage Market Guide
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