Weekly Update February 6, 2019

Rates were flat to slightly lower again this week as mortgage bond prices face technical resistance.  This resistance is, in part, keeping mortgage rates from falling further, but the good news is that resistance is near levels not seen since early 2018.  If rates can break through this resistance we could actually see rates fall even further.  Technical analysis can often be challenging to understand, but it is nonetheless important as it helps to explain where pricing is and where it is heading.  When used with fundamental analysis, this can be a very powerful tool to assure clients are receiving the best rates and pricing possible. 

On the Fundamental side, we continue to see strength in our domestic markets and weakening in many foreign markets.  How does this impact mortgage interest rates?  An investor looking for low risk might look at US bond markets, specifically US Treasuries and mortgage bonds, as a safe haven since other global options carry more risk.  That creates a greater demand for domestic investments, including mortgage bonds.  As demand increases, investors are willing to pay more for it.  Recall that bond prices are inversely correlated with interest rates so as demand drives up prices, new mortgage interest rates fall.

 However, there is a flip side to this.  Economies around the world do business with each other through imports and exports.  Although the US economy is continuing to do very well, many of our trade partners around the world are not.  This means that demand for our exports will also likely fall, which will eventually impact our economy as well.  To some extent, we are tied to all other economies around the globe.  These factors, along with countless others not mentioned here, can make it challenging to understand and anticipate rate movement.  Take care of your valuable clients.  Make sure they are working with mortgage professionals who understand interest rates and driving factors behind them.