Mortgage Rates Continue to Fall
Mortgage rates are continuing to fall, even in light of what is usually
a volatile week with Jobs Report information due during the first week of each
month. The most prevalently quoted conforming 30yr fixed rates for top tier
borrowers has now dropped to 3.875%, with 3.75%
coming into play with additional fees.
This year is already starting as we expected with a high level of volatility - and this is only the start of it. Markets can sweep bad news under the rug for only so long before the dust becomes so high we trip on it. Europe has been on front burner for most of 2014, we talk about the deflationary spiral that is driving the EU economies down, the lack of jobs, the Russian sanctions, and more recently Greece. After the long two week holiday markets are back to full attendance now and the result, at least today, doesn’t speak well for the first quarter of 2015. Early this afternoon the DJIA index was down 350 points, the other two indexes also hit hard.
A new low price for crude oil today feeds the deflationary outlook for the global economies, as it has been ignored for the most part by investors in US equities and other investments until now. No longer will it be dust under the rug but a full bore factor that will increasingly send stocks lower with lower highs on rallies and fresh new lows on selling bouts. Commodities of all types are declining and will continue as long as base key commodities work lower, especially oil.
The rapid increase in the value of the dollar is also beginning to worry investors. As the dollar strengthens against the euro currency and Japanese yen the purchasing power for those citizens diminishes against US products. So far the strength of the dollar has been more of that dust under the rug, but as key foreign currencies weaken further the wakeup call will become louder.
Now, the biggest issue is presently hitting market reality. The EU is heading head-long into deflation - unable to avoid it even if the ECB acts decisively later this month to launch another QE (buying sovereign debt from EU members). All ECB actions to this point over the last five years have fallen well short of accomplishing anything significant. This time will most likely also fail to achieve what Draghi fears most - deflation.
Last week I did state that the first quarter could be volatile. Interest rates are going to fall further - how low is anybody’s guess. At the present low level of the 10yr and 30yr treasuries, at historic lows, and the Fed so far is still thought to be ready to increase rates by summer, the confluence of global economic weakness forecasting the lows is not realistic. One pundit out today is predicting the 10yr to drop to 1.40% - hard to picture but 2015 will provide a lot of those fuzzy forecasts.
CNBC had an interesting segment this afternoon on the margin levels that currently exist in the stock market. Margin buying of US equities is presently at 3.0% of GDP, normal margin levels average about 1.0% of GDP. The last time margin buying hit 3.0% of GDP….1929. If stocks were to continue to soften it will drive margin buyers to cover quickly adding even more to declines.
How low will interest rates fall? I have no idea at these historic lows. What I do know is we will not be pushed out of our bullish near term outlook until the market tells us the time has come. Holding closed loans or floating loans will not be easy though. I am totally convinced the next few months will be more volatile than we have seen in the last five years.
In summary, Euro drama is picking up steam helping mortgage rates here to be the best in well over a year. With the Euro drama not likely to be solved anytime soon, I am continuing with my strategy of floating until you are within two weeks of closing, then locking. Anything closing in more than 15 days is a bit of a risk, but maybe still a safe bet unless you fear the worst, then lock at these great rates.
This year is already starting as we expected with a high level of volatility - and this is only the start of it. Markets can sweep bad news under the rug for only so long before the dust becomes so high we trip on it. Europe has been on front burner for most of 2014, we talk about the deflationary spiral that is driving the EU economies down, the lack of jobs, the Russian sanctions, and more recently Greece. After the long two week holiday markets are back to full attendance now and the result, at least today, doesn’t speak well for the first quarter of 2015. Early this afternoon the DJIA index was down 350 points, the other two indexes also hit hard.
A new low price for crude oil today feeds the deflationary outlook for the global economies, as it has been ignored for the most part by investors in US equities and other investments until now. No longer will it be dust under the rug but a full bore factor that will increasingly send stocks lower with lower highs on rallies and fresh new lows on selling bouts. Commodities of all types are declining and will continue as long as base key commodities work lower, especially oil.
The rapid increase in the value of the dollar is also beginning to worry investors. As the dollar strengthens against the euro currency and Japanese yen the purchasing power for those citizens diminishes against US products. So far the strength of the dollar has been more of that dust under the rug, but as key foreign currencies weaken further the wakeup call will become louder.
Now, the biggest issue is presently hitting market reality. The EU is heading head-long into deflation - unable to avoid it even if the ECB acts decisively later this month to launch another QE (buying sovereign debt from EU members). All ECB actions to this point over the last five years have fallen well short of accomplishing anything significant. This time will most likely also fail to achieve what Draghi fears most - deflation.
Last week I did state that the first quarter could be volatile. Interest rates are going to fall further - how low is anybody’s guess. At the present low level of the 10yr and 30yr treasuries, at historic lows, and the Fed so far is still thought to be ready to increase rates by summer, the confluence of global economic weakness forecasting the lows is not realistic. One pundit out today is predicting the 10yr to drop to 1.40% - hard to picture but 2015 will provide a lot of those fuzzy forecasts.
CNBC had an interesting segment this afternoon on the margin levels that currently exist in the stock market. Margin buying of US equities is presently at 3.0% of GDP, normal margin levels average about 1.0% of GDP. The last time margin buying hit 3.0% of GDP….1929. If stocks were to continue to soften it will drive margin buyers to cover quickly adding even more to declines.
How low will interest rates fall? I have no idea at these historic lows. What I do know is we will not be pushed out of our bullish near term outlook until the market tells us the time has come. Holding closed loans or floating loans will not be easy though. I am totally convinced the next few months will be more volatile than we have seen in the last five years.
In summary, Euro drama is picking up steam helping mortgage rates here to be the best in well over a year. With the Euro drama not likely to be solved anytime soon, I am continuing with my strategy of floating until you are within two weeks of closing, then locking. Anything closing in more than 15 days is a bit of a risk, but maybe still a safe bet unless you fear the worst, then lock at these great rates.
Remember, if you want to know the benefits of
locking your rate today versus floating, simply give me a call at 314-744-7806
or visit my website at www.CallTheMoneyMan.com. I have
access to real time Wall Street data and instant market alerts with breaking
news that I monitor throughout the day to assist us on making the informed
decision.
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