Static Mortgage Rates
Mortgage interest rates are still in the same general range since June 2019, with no significant move higher or lower. The Federal Reserve left their target rate alone, The Fed Funds, at the December 2019 Open Market Committee Meeting. The Fed Funds rate remained at 1.75%, which is .75% lower than it was a year ago. The Fed Funds rate only affects one consumer interest rate directly, The Prime Rate.
The Prime Rate
The Prime Rate affects revolving lines of credit like credit cards and Home Equity Lines of Credit, HELOCs. The Prime Rate doesn’t directly affect fixed mortgage interest rates, but all mortgage interest rates eventually follow The Fed Funds and The Prime Rate. When those two rates are trending up or down, mortgage rates will also trend in those directions, eventually.
The Fed is in a wait and see mode regarding their target rate, which means each Fed meeting could result in movement up or down depending on certain factors in the economy. Inflation is the main metric the Fed looks at when making a decision on its target rate. When inflation is hot and increasing, the Fed will feel pressure to increase The Fed Funds rate to slow inflation. If the economy is slowing, heading into recession, or in a recession, the Fed will lower the Fed Funds rate to help reduce the Prime Rate to stimulate consumer spending.
Hot Stock Market Effect
The main factor recently that has kept mortgage rates from falling lower is the hot stock market. When stocks are up, it pulls investor dollars out of the bond market which causes bond yields to increase. Bond yields set the basis for mortgage rates.
The rule of thumb when tracking mortgage rates is when stocks are up and bonds are down, bond yields increase, and mortgage rates also increase.
The opposite is also true. When stocks are down and investor dollars flow into the bond market, bond yields decrease which causes mortgage rates to also decrease.
Here’s more about How Stocks and Bonds Work Together and why they typically move in opposite directions.
Mortgage Rate Quote
If you want to keep an eye on where mortgage rates are going, keep an eye on the stock market and on the 30 Year and 10 Year treasury bond yields. You can also feel free to reach out to me any time to get a mortgaege rate quote for your situation.
Happy New Year!
Looking forward to another busy year in 2020. Wishing you all a happy and prosperous New Year!
Please feel free to contact me directly for a free credit check and mortgage consultation.
— As always, your loan guy
Viral “Vic” Joshi
To get more of my timely market updates, subscribe to my monthly email newsletter.