European Influence Could Impact Mortgage Interest Rates

Stocks had another terrible day on Friday, with prices falling to the floor of support we have identified in recent market updates. Unfortunately for mortgage interest rates, this floor has once again proven its strength. Although I believe a drop beneath this critical level is imminent, the timing of this occurring is unknown. It will likely take a negative event to provide stock investors with the deep dose of reality that I believe they should have caught on to long before now. I realize that my opinion may not be in line with what most economists believe. However, more and more are moving over to my point of view each day.

A look back on the history of mortgage interest rates, there are clear situations that led to most major interest rate declines. One of the greatest influences has been events overseas. Consider the impact Brexit had on mortgage rates, or the debt crisis in Greece. These events were responsible for driving U.S. interest rates down into record low territories.

I believe that we are once again on the verge of facing more crisis in Europe. First, Brexit is currently scheduled to begin on March 29^th. This major event could throw the U.K. into a deep recession as it learns how to function apart from the European Union. In addition, there is a major crisis brewing in Italy that would have a severe impact on the global economy. I believe that as a result we will see global yields fall, which will help support lower mortgage interest rates.

Unless mortgage bond prices can break above their 200-day moving average, we will maintain our locking bias.