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Are mortgage interest rates actually falling or rising this year?

All through the winter in 2019, we noticed significant fall in the trend of Mortgage rates, both in the United States and around the world. Mortgage customers and borrowers have been on the look out to see what the mortgage interest rates trend would be this year 2020, so they can make decision on whether to purchase or refinance.

While trying to time mortgage market moves is dicey, forecast from financial experts is that the outlook for interest rates won’t be the 5 percent projected by most at the end of 2019. Instead of that, most experts see interests to peak somewhere around 4.5-47

Below are some of the consensus of economic experts regarding the trend of mortgage interest rates for the year 2020:

2020 Mortgage Interest Trend #1: Depreciation of the Federal Reserve

Many real estate economists forecast a slight downward trend in mortgage interest rates. According to Smoke Jonathan, Chief Economic Officer for Realtor.com, mortgage interest rates are impacted by many unpredictable factors, but in the recent years its been able to understand and predict better.

The impact of the changes in the current administration, International security and immigration policy changes has significant impact on the global and national economic climate of the country.

Rates moved up slightly after the election in anticipation of more inflation to come combined with long-overdue expectation of the Federal Reserve moving up short term rates.

But when the expected factors did move, long term rates now moved even more substantially, and way more than the inflation data would suggest was appropriate.

Despite all those changes we saw in 2019, we haven’t seen much changes since January 2020.Also, the January employment report showed higher unemployment and no evidence of inflationary wage pressures in the nation and globally speaking

2020 Mortgage Interest Trend #2: Impact of the Political Instability in the U.S on the mortgage trend

mortgage trends 2020 chart
image source: forbes

One of the factors that has allowed the Mortgage trend an easy one to predict has been the instability in the nation and in the world at large

There wasn’t much to get excited about from an economic standpoint. The year 2019 we witnessed some excitement in the markets and then at some point it began to change in the opposite direction.

With the Trump trade wearing off a little bit, we see money moving back into mortgage bonds and interest rates are coming back down a little. We do hope that we remain stuck in a 0.25% range for the rest of 2020.

We have already seen many up and down days of 5 basis points or more changes as the financial markets try to ingest the policies and economic implications of the Trump’s administration.

2020 Mortgage Interest Trend #3: Global Political Uncertainty Impact on Mortgage Interest Rate.

The Global political climate hasn’t been favorably stable since the present administration. There has been lots of issues plaguing several nations in the West, middle east and Africa.

All of these pose major impact on the nation’s economy. Recently, the president has imposed sanctions and made decisions that impacts several nations trade relationship with the United States.

With all these changes and other forecasted changes, we do not anticipate much positive trend in mortgage interest this year.

As already mentioned, a range of other possible fiscal policies being discussed by the new administration would likely lead to higher inflation. All these things would lead to higher rates. So, the best assumption to make is that rates will trend higher this year.

Uncertainty abroad could drive a flight-to-quality and drive down U.S. Treasury yields. Quantitative easing in Europe is getting closer to its taper moment and the Federal Reserve may start reducing its holdings of mortgage backed securities.

It’s still hard to fully predict how the various political changes in Europe this year will play out, but uncertainty about those outcomes could contribute to downward pressure on long-term rates here in the U.S.

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