27 Jan Rates At Multi-Year Lows
Stocks are falling hard in premarket trading, a long overdue technical move lower. In any market, it isn’t healthy to see such rapid long-term growth without a break along the way. Mid-cycle corrections are a healthy part of a long term growth pattern. A mid-cycle correction can be as much as a 50% loss of gains since the last mid-cycle correction before it should be considered a longer term move lower. Once the investment class losses up to 50% of its recent gains, it then can have the strength needed to once again challenge the previous highs and in many cases push even higher. In the meantime, this will help maintain low mortgage interest rates while stocks take a minute to regain their strength or decide if this will be a longer term drop in the valuation of the stock market.
This will be an important news week for mortgage bonds, with many significant economic reports scheduled to hit the news wires. Most importantly, we will receive an update on both consumer inflation as well as GDP. With GDP numbers in 2020 expected to be softer than in recent past years, a stronger than anticipated report could scare the bond market, pressuring mortgage interest rates higher. We will keep you posted as the reports are released. However, just know that now is a time to be cautious and not take too many risks when deciding to lock or float an interest rate.
Mortgage interest rates have only been this low two times since just after President Trump was elected. Since both were mid-last year, there isn’t a lot of history of rates being able to sustain such low levels. In fact, both times that rates hit this low level, a dramatic increase immediately followed. As a result, we will suggest a locking bias.