January 25th, 2020 7:16 PM by Regina Rickles, NMLS# 222362
February could be a wild ride for mortgage rates. Market-moving news will leave rates different than they were in January. The only question is, will they be more or less advantageous for mortgage shoppers?
Forecasts for 2020 say rates will average around 3.7%. However, that doesn’t tell you how high or low rates could go throughout the year.
Rates could be 4.5% for six months and 3.4% for the next six months and you still get an average of 3.9%. But when you lock matters a lot.
Rates are hovering near 3.8% now according to Freddie Mac data, so it’s an excellent time to lock in and eliminate the risk of higher rates later.
Reports of a new virus originating in Wuhan, China is strangely affecting mortgage rates. This trend could gain momentum in February.
As January came to a close, markets were watching the spread of the virus, with new cases being discovered in the US and other countries.
Mortgage rate watchers are justified in wondering how a virus could affect rates. The relationship is not exactly obvious.
Mortgage rates fall during times of economic uncertainty and lower expectations of inflation. The Wuhan Coronavirus contributes to both.
Officials are limiting travel and transportation in Wuhan, which is a major trade and export hub in China. The decreased activity and mobility in one of China’s largest cities could spark a wider slowdown that could disrupt economic growth and slow inflation worldwide.
Of course, no one wants a global outbreak, but one unexpected outcome could be lower rates throughout February and perhaps beyond.
Don’t expect much movement in mortgage rates after the January 28-29 Federal Reserve meeting.
The group has broadcasted again and again that it likes the level of its benchmark rate, called the federal funds rate.
After slicing the rate three times in 2019 — in the face of one of the greatest expansions in US history — the Federal Reserve isn’t enthusiastic to provide more stimulus to an already-hot economy.
In fact, the Fed doesn’t expect to drop rates again at all in 2020.
Unemployment is near 50-year lows, the stock market is at all-time highs, and inflation is stagnant. It’s a real “Goldilocks scenario” — meaning nearly all aspects of the economy are just right.
All this means the January 2020 Fed meeting should be a real snoozer, with no rate adjustment and no major policy shifts.
Luckily, mortgage rates are already low and don’t need an artificial push downward by the Fed.