Economic uncertainty is a friend to low mortgage rates. There is plenty of apprehension in the news this month. So could the first quarter be a brief window for consumers to lock in bargain rates?

There have been several noteworthy events this year that may affect home mortgage interest rates including the longest shutdown in U.S. government history with another shutdown looming and internationally, Britain is untangling how to leave the European Union. These factors may cause investors to flee the stock market and take shelter in the bond market. That shift puts downward pressure on residential mortgage rates. Mike Fratantoni, chief economist for the Mortgage Bankers Association (MBA), said in a press release, “Uncertainty regarding the government shutdown, slowing global growth, Brexit, a more patient Fed, and a volatile stock market continued to keep rates from increasing.”

Indeed, the 30-year fixed mortgage rate benchmark has been on the decline for the prior 6 weeks. The trend turned sharply downward in early December with the prospect of an impasse in the government shutdown negotiations. The chart below from the Federal Reserve Bank of St. Louis shows the path of the 30-year fixed rate for all of 2018.

The residential 30-year fixed mortgage benchmark rate has been in an upward channel since January 2018 when it started the year at 3.95%. It dipped in the last month of the year and may represent a good opportunity to buy or refinance? Earlier, mortgage rates fell to their lowest level in 9 months, according to Freddie Mac’s Primary Market Mortgage Survey (PMMS). The drop comes after rates have been on an steady uphill climb since the start of 2018.

The change coincides with mortgage purchase applications reaching an 8-year high recently. Additionally. Refinance applications, as a share of total home loan activity, reached its highest level since January 2018. Perhaps sensing that the best rates are in the rearview mirror, many buyers are now moving off of the fence.

Trey Langford
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